Bankers know that what is commonly called Check 21 is at the heart of our present payment system. The check images delivered pursuant to its terms have made check processing simpler and faster for more than a decade.

So it may come as a surprise that basic legal questions under the Expedited Funds Availability Act (the formal name for Check 21) continue to arise. What happens for example when two of the regulations intend to implement the Act require contrary conclusions.  Such as for example, the question of the meaning of the warranty under Regulation J that an electronic check image “must accurately represent all of the information on the front and back of the original check….” when another regulation, Regulation CC, suggests that is not always required.

The question raised by the Fumiko Bandit case is the meaning of the Regulation J warranty when a paper check is imaged in the manner required by Regulation CC so the image can be presented for collection. Under Regulation CC, it is clear that some information on a paper check is not required to survive the imaging process.  But Regulation J requires check images show “all of the information” on paper checks.…