I have read that images of substitute checks do not fall under the provisions (specifically expedited recrediting)of Check 21. Since we already have image statements, and we are going to be receiving and sending our cash letter electronically, does check 21 still apply to our bank and our customers? If so, how?

It sounds like you will never render a SC in a statement to a consumer account holder, therefore, you will not be exposed to Check 21 recredit provision. If you submit forward presentment items in image form and you recive return items in image form from the paying bank or FRB, you will most likely need to create a SC of the return item that you chargeback to the depositor. In this case, you can be subject to expedited recredit since you are the reconverting bank.

As far as expedited recredit is concerned, the following appears in the commentary to the Check 21 rule under "229.54(a) Circumstances Giving Rise to a Claim".

1. A consumer may make a claim for expedited recredit under this section only for a substitute check that he or she has received. Thus, a consumer that received only an image statement containing an image of a substitute check would not be entitled to make an expedited recredit claim, although he or she could seek redress under other provisions of law, such as § 229.52 or U.C.C. § 4-401. However, a consumer who originally received only an image statement but later received a substitute check, such as in response to a request for a copy of a check shown in the statement, could bring a claim if the other expedited recredit criteria were met.