AFP Urges Legal Clarification of Substitute Checks

he Federal Reserve Board (FRB) must clarify the legal protections afforded to corporate users of substitute checks authorized by the Check 21 Act, according to recommendations issued by the Association of Financial Professionals (AFP). The association has also requested the FRB provide examples of the legal and operational consequences of using substitute checks. Check 21 will bring about wide-ranging changes in check collection practices. Consequently, the AFP urged the Board to accept industry standards for substitute checks only if they retain the integrity of corporate cash management services, incorporate advanced fraud control techniques and adhere to quality measures. In addition, the AFP recommended payors who receive substitute checks be afforded the same legal protection against fraud that they have when fraud occurs on their original checks. The association also noted that it opposed any provision in the rule that would deny legal equivalence to a substitute check requested by a company specifically to resolve a payment dispute or claim.


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