Check
21 Resource Center
The Check Clearing for the 21st
Century Act (Check 21) was signed into law on October 28, 2003,
and will become effective on October 28, 2004. Check 21 is designed
to foster innovation in the payments system and to enhance its
efficiency by reducing some of the legal impediments to check truncation.
The law facilitates check truncation by creating a new negotiable
instrument called a substitute check, which would permit banks
to truncate original checks, to process check information electronically,
and to deliver substitute checks to banks that want to continue
receiving paper checks. A substitute check would be the legal equivalent
of the original check and would include all the information contained
on the original check.
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Sample
Substitute Check (IRD) |
Check 21
Frequently Asked Questions:
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What
happens to the paper checks under Check 21?:
The goal of Check 21 is to improve
the efficiency of our
country’s payment system and allow checks to be “truncated.” The
original paper check is removed from the check collection
or return
process and an electronic image (substitute check) of the
item is transmitted in place of
the original. |
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What
is a Substitute Check? The substitute
check is a paper reproduction of the original check that
must (1) contain an image of the front and back of the
original check; (2) bear a MICR line containing all the
information appearing on the
MICR line of the original check; (3) conform, in paper
stock, dimension, and otherwise, with generally
applicable industry standards for substitute checks; and
(4) be suitable for automated processing in the same
manner as the original check. A substitute check is the legal
equivalent of the original
check if it (1) accurately represents all the information
on the front and back of the original check at the time
the original was truncated and (2) bears a legend that
states “This is a legal copy of your check. You can use
it
the same way you would use the original check.” |
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What
Does Check 21 Require? Check 21 requires
financial institutions to
accept a substitute check from a presenting institution
and grant it equivalent status as the original check, if
the substitute check meets prescribed requirements.
Check 21 requires a reconverting bank to meet the
warranties and indemnities enacted through the
legislation and subsequent regulations. Check 21 requires
financial institutions to provide education to individual consumers
on substitute checks and consumer reaccredit rights. |
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What
happens to the original check? The
institution that converts your check to an electronic
transaction may choose to destroy the check. This is
why some of your original
checks will not show up along with the statements.
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Additional Check 21 Resources:
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