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Check 21

Q & A about Check 21 – Important Information Regarding Your Checking Account

Q: What is Check 21?
A: Check 21, also known as Check Clearing of the 21st Century, is an Act recently passed by Congress that will take effect on October 28, 2004. The Act provides for the use of electronically transmitted images of checks and the creation of a “substitute check” that will make check processing less expensive and more efficient.

Q: What Is a Substitute Check?
A: A substitute check is a paper representation of a check that was earlier converted to electronic form (as an image). It includes all of the information that was on the original check at the time it was truncated (converted), including the endorsements and other information on the back. It’s printed on check stock and is about the size of a standard business check. A reduced image (more reduced for business checks) of the front of the original check appears on the front, and the image of the reverse of the original appears on the back. On the front, to the left of the check image, appears the legend, “This is a LEGAL COPY of your check. You can use it the same way you would use the original check.”

Q: Will my statement change?
A: Your statement will not change. You may receive imaged copies of substitute checks as well as the images you currently receive.

Q: Can I insist on getting my original checks back?
A: No. Substitute checks will have all the legal standing your original checks. In many, if not most, cases the original check will have been destroyed soon after being imaged.

Q: How will Check 21 affect float time?
A: Float won’t disappear anytime soon, but it will be reduced on some items. Some checks will start to travel all or part of the way through the check clearing system in image format. That will mean they will travel much more quickly and may hit your account before the customer anticipates they will. While only some checks will be affected this way, there’s no way to predict which ones, so you need to be prepared -- and have your deposits in your accounts before you write checks. For example: If Barney writes a check to Andy and Andy deposits it at his bank, Andy’s bank may convert the check to an image. If it does, whether it will stay in imaged form will depend on whether the next bank in the chain is willing to accept an image. If they are, the image travels quickly to the next point, and so on, up until the point one of the banks in the chain says, “Stop! We want paper!” and the image must be reconverted into a substitute check. It’s like driving down a long road with lots of stop lights. The more green lights you get, the quicker the journey. Every time a check gets a green light to travel part of the journey in image form, it travels more quickly. An imaged check could literally go from the bank of first deposit to the payor bank in minutes if each bank in the process agrees to accept an image. There’s no way to know which checks will get green lights and which ones won’t. Only those that do will have reduced float. Check writer beware!

Q: When would I see a substitute check?
A: Whether or not your institution elects to accept images from sending banks, you will see substitute checks in both the forward collection process and with return items. You will also see return item substitute checks that customers attempt to redeposit or cash.

Q: What if my original check and a substitute check both get processed?
A: To be able to create a substitute check, the financial institution must warrant that the original check will not be processed. If the original and the substitute were to both get processed you will be able to submit a claim.

Q: What if the substitute check is not an accurate image of the check I wrote and I need the original to prove my claim?
A: The Check 21 Act gives specific recrediting rights to consumers. If the substitute check were to not accurately replicate the transaction, you would need to contact your account provider immediately.

Q: What if there is a disagreement and the service provider will not accept the substitute check as proof of payment?
A: Courts, retailers, and service providers are all required by law to accept the substitute check as proof of payment. The substitute check is the legal equivalent of its original.

Q: What is the difference between an electronic check conversion and a substitute check?
A: With an electronic check the transaction is routed through the Automated Clearing House network. The transaction will appear on your account statement along with other transactions. A substitute check is formed from an image of the original check, processed as a check, and appears on your statement as a check.