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Check 21

Recently, you may have received information from your bank notifying you of changes to the way your checks will be processed or returned to you.  These changes are the result of a new law called the Check Clearing for the 21st Century Act, which became effective October 28, 2004.  The purpose of the Act is to make check processing faster by removing legal impediments to the electronic transfer of checks.

Since physically transferring paper checks can be slow and inefficient, the Act, also known as Check 21, permits banks to capture a picture of the front and back of the check, along with the associated payment information, and transfer such information electronically.  For those times that a paper check is needed, banks may use the electronic picture and payment information to create a “substitute check.”  The front of a substitute check should state:  “This is a legal copy of your check.  You can use it the same way you would use the original check.”

Not all copies of a check are a substitute check though.  You may receive pictures of multiple checks printed on a page with your monthly statement.  Such copies are known as an image statement and are not substitute checks.

So, how will Check 21 affect you?  For starters, you should make sure that you have enough money in your account to cover every check you write since Check 21 is designed to expedite check processing.  The quicker a check is processed, the quicker the money will be deducted from your account.

Also, if you receive copies of your cancelled checks with your account statement, you may notice that some of the checks are substitute checks.  Substitute checks may be used as proof of payment just as an original check could.  And as with original checks, you should always review each substitute check for inaccuracies or fraud.