Sending a "Notice in Lieu of Return"

Regulation CC allows you to return a notice instead of the check itself in two circumstances: when the check is not available and when you have an agreement with the depositary bank or a returning bank authorizing you to do so.

When the Check is not Available

If you decide to return a check but the check has been lost or destroyed or is unavailable for some other reason (other than that it is merely difficult to retrieve from a filing system or from storage), you must send a “notice in lieu of return” instead of the check. [12 CFR 229.31(f)] The notice in lieu of return can either be a copy of the front and back of the check or it can be a notice containing the following:
  1. The information contained in the check's MICR line when the check is received by the paying bank;
  2. The name of the payee(s);
  3. The amount of the check;
  4. The date of the indorsement of the depositary bank;
  5. The bank name, routing number, and sequence or trace number associated with the indorsement of the depositary bank; and
  6. The reason for nonpayment.

[12 CFR 229.31(f)

If you are not sure of the information required by any of these items, you must include as much information as you can and mark any information of which you are not sure with question marks, asterisks, or some other industry-approved symbol. [12 CFR 229.31(c)(2)(ii)]

Whether you send a copy of the check or a notice, the copy or notice should clearly state that it is a notice in lieu of return. If you send a copy, remember to also state the reason for return on the copy. [12 CFR 229.31(f)]

A notice in lieu of return becomes the return check for all the purposes of Subpart C. This means that you must meet the expeditious-return requirements and any other requirements of Subpart C that apply to the return of checks. [12 CFR 29.31(f)] This also means that a notice in lieu of return must take written form. Transmitting this information by telephone or fax would be sufficient only if it resulted in a legible facsimile copy. This requirement is necessary because the notice itself has value as would a return check. [Commentary, 12 CFR 229.31(f)-1] When you send a notice in lieu of return, you warrant that the original check has not and will not be returned. [Commentary, 12 CFR 229.31(f)-1]

When you have an agreement with the depositary bank or a returning bank

Regulation CC allows you to agree with the depositary bank or a returning bank to send an image or notice instead of the check itself, even if the check itself is available to you. [Commentary, 12 CFR 229.37, C.-10] Before entering in to such an agreement, however, you should keep in mind that the agreement would not be binding on anyone who is not a party to it. The depositor on the check and any earlier parties may need the physical check to enforce their rights, and they may have claims under Regulation CC or the UCC against the paying and returning banks for losses due to the absence of the check. For a full discussion of this issue, see the Federal Register for November 3, 1999, at page 59607.