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A copy of a substitute check Is it legal
WASHINGTON (12/31/07)—If a substitute check created under CHECK 21 is the legal equivalent of an original check, should a photocopy of the substitute also be accepted also as equivalent, asks the December Compliance Challenge from the Credit Union National Association (CUNA). The Challenge quizzes compliance experts on the following situation: If a member writes a share draft to a nonmember, and the nonmember’s bank converts it to a substitute check under Check 21, can a photocopy of the substitute be used to collect the funds from the credit union if the original or substitute are lost or destroyed? The answer, CUNA’s compliance folks advise, is no--a credit union should not cash the photocopy because it is not the legal equivalent of a check. Accepting a photocopy of a check as a valid check and cashing it could expose the credit union to liability and a potential lawsuit by the member. Under Check 21 a substitute check is the legal equivalent of an original check, if the substitute check:
* Accurately represents all of the information on the front and back of the original check as of the time the original check was truncated; and * Bears the legend: “This is a legal copy of your check. You can use it the same way you would use the original check.”
“Clearly, a photocopy of a substitute check might appear the same as a substitute check, but is only a ‘copy’ and would not be considered the legal equivalent of the original check. Therefore, a photocopy would not be considered a negotiable instrument and could not be cashed,” says the Challenge. To see what actions are advised and to test your compliance acumen, use the resource link below to take CUNA’s Compliance Challenge.
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