Checking
Check 21

Checks in the 21st Century

In October 2003, the Check Clearing for the 21st Century Act became law. Now known simply as Check 21, the legislation's goals include "to improve the overall efficiency of the nation's payments system."

Today, most checks must be physically transported - whether across town or across the country - before they can be cleared. This is expensive and time-consuming. Check 21 provides a new option: legal acceptance of paper reproductions of original checks. This reproduction is called a "substitute check" and is produced from a digital image of the original check.

Sample substitute check

This is a legal copy of your check. You can use it the same way you would use the original check.

Efficient Check Clearing Benefits You

The improvements brought about through Check 21 allow for faster payment processing and even better service to you, the banking customer. A few of the benefits include:

• Faster check clearing - Electronic processing of checks will allow for funds to be collected more quickly.
  
• Fraud/Error detection - If an error occurs, or you're the victim of check fraud, electronic processing will mean that problems can be identified and solved more quickly.
  
• Convenience - New choices for consumers including check images in statements and access to images online provide secure and space saving storage options.

How Will Check 21 Affect You?

By October 28, 2004, every bank will be required to accept substitute checks, just as they currently accept your original paper checks. If you receive your cancelled checks in your monthly statement, or if you view images of them online, you may begin seeing substitute checks after that date. A substitute check is the legal equivalent of the original check and will include all the information contained on the original.

A Glance at Check Conversion

You may already have experienced two other emerging payment practices, and each is an example of "check conversion" (converting your checks to an electronic format), which uses the automated clearinghouse, or ACH payment system.

In the first example, a retailer converts a paper check into an electronic ACH payment on the spot. In this situation, if you've written a check for a purchase, you are handed the check back immediately after it's converted into an electronic ACH payment at the store or shop.

In the second example, regular billers (telephone, utilities and credit card providers, for example) convert your check payments into ACH payments. The check has been "converted" to an electronic format, and you won't receive a copy of the original. The payment will be reflected in your bank statement, which becomes the legally accepted proof of your payment.

Keep in mind that both of these example transactions are different from substitute checks. These allow for faster payment processing and even better service to the nation's banking customers.