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FAQ
Check 21 Legislation
The Check Clearing for the 21st Century
Act, also known as Check 21, goes into effect nationwide
on October 28, 2004. This key legislation will improve
banking in the United States, making check processing
faster and more consistent, as well as open the door
for banks to innovate, become more efficient and add
value for customers.
What is Check 21?
Why was Check 21 legislation created?
What does this new legislation mean?
What are the primary benefits of Check
21?
Is Check 21 a direct result of the events
occurring on September 11, 2001?
What does Check 21 mean to me as a Bank customer?
How does Check 21 affect Bank customers?
Does Check 21 only impact Bank customers?
Are there any checks exempt from Check
21 legislation?
What is a substitute check and what will
it look like?
How am I assured that Bank will not charge
my account for both an original and a substitute check?
Will I still have the option to receive
my cancelled checks with my monthly statement?
How will the check payment process change
as a result of Check 21?
Why was Check 21 legislation
created?
Check 21 legislation was created to facilitate check
truncation and foster innovation in check collection
systems, while improving the overall efficiency of
the nation's payment system. Check 21 creates a new
negotiable instrument called a "substitute check."
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What does this new legislation
mean?
Check 21 provides the legal basis for banks to choose
to transport checks electronically, making it less
dependent on the physical transportation of checks.
It will allow banks to process checks by allowing
them to electronically capture and transmit an image
of the check.
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What are the primary benefits
of Check 21?
While the effects of Check 21 on banking will be very
gradual, over time, you may see the following benefits:
checks and deposits will clear faster and more consistently.
retrieving copies of checks and other documents will
be easier.
an enhanced customer banking experience as a result
of additional image technology.
some cancelled checks returned in your statement may
be replaced by substitute checks (a paper reproduction
and legal equivalent of an original check).
new products and services that will help you better
manage your finances.
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Is Check 21 a direct result of
the events occurring on September 11, 2001?
No. Check 21 legislation was first crafted in 1998,
but the events of September 11 reinforced the need
to develop better technology that allowed the movement
and transportation of checks around the country.
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How does Check 21 affect Bank
customers?
Check 21 allows bank customers better access to information
through the development and leveraging of image technology.
It also makes retrieving copies of checks and other
documents more convenient, while providing customers
with an enhanced banking experience.
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Does Check 21 only impact all
Bank customers?
No, the legislation is broad in scope and covers all
banks and all customers within the United States.
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Are there any checks exempt from
Check 21 legislation?
All checks, except foreign checks, are eligible to become
substitute checks, including, but not limited to, the
following:
Consumer checks
Business checks
Corporate checks
Government warrants
U. S. Treasury checks
Money orders
Controlled disbursement checks
Payable through drafts
Traveler's checks
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What is a substitute check and
what will it look like?
Check 21 creates a new negotiable instrument for banks
called a substitute check. A substitute check is a paper
reproduction of an original check and is a legal equivalent
of an original check for all purposes, provided the
following:
contains an image of the front and back of the original
check;
bears an MICR line (the encoded line of information
for bank processing) containing all the information
appearing on the MICR line of the original check, except
as provided under generally applicable industry standards
for substitute checks to facilitate the processing of
substitute checks (regulations are still under advisement
at this time);
conforms, in paper stock, dimension and otherwise, with
generally applicable industry standard for substitute
checks; and
is suitable for automated processing in the same manner
as the original check.
A substitute check must also include information identical
to the information on the original check. The bank that
creates the substitute check must warrant that the check
meets the requirements of being a legal equivalent of
the original check. The substitute check must also bear
the following legend:
This is A LEGAL COPY of your check. You can use it the
same way you would use the original check.
The bank that creates a substitute check may process
the check under normal paper-based check processing
procedures.
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How am I assured that Bank will
not charge my account for both an original and a substitute?
Today, all banks guarantee under normal banking regulations
that they will not charge a customer's account twice
for the same transaction. Check 21 legislation also
addresses those same banking regulations. They are
called warranties and indemnities in the Financial
Industry. A customer will not be charged for an original
check and again for a substitute check.
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Will I still have the option
to receive my cancelled checks with my monthly statement?
Yes. Bank customers will still have the option to
receive check return as part of their monthly statement.
Upon implementation of Check 21 if the services is
offered by your bank. Bank customers choosing check
return may begin to see a mix of original checks and
substitute checks in their statements. This will occur
very gradually over time.
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How will the check payment process
change as a result of Check 21?
Today, banks receiving deposited checks from customers
are required to deliver the original paper checks
to the paying bank for payment. Check 21 makes the
financial system less vulnerable to man-made or natural
disasters that disrupt physical transportation networks.
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