What is Check 21?

The Check Clearing for the 21st Century Act, also known as the Check 21 Act, affects the way checks are processed in the United States. This act promotes check truncation and electronic check presentment. In other words, under Check 21 a bank can substitute a machine-readable copy of a check (a “substitute check”) for the original check for collection or return. Substitute checks that meet the requirements of the act would be the legal and practical equivalent of the original check.

When will Check 21 go into effect?

The president signed the bill into law on Oct. 28, 2003, and the act’s effective date is Oct. 28, 2004.

What’s the purpose of Check 21?

It allows financial institutions to stop shipping customers’ checks back and forth to clear them. Instead, the institutions can send electronic images of the checks. This will lead to cheaper, faster and safer check processing. At least $250 million a year is being spent now on moving checks across town and across the country; so, estimates of eventual savings are large. In addition, the number of lost, damaged or stolen checks should be greatly reduced.

Where will substitute checks be used?

Bank employees may see a substitute check any place that they would see an original check, a photocopy, or an image. Bank customers may see a substitute check when they receive their periodic statement, when viewing check images via online banking, if they request a copy of the paid check from the bank or as a deposited check that is returned unpaid. For more information on Check 21, refer to www.frbservices.org/Retail/Check21.html.

Back to the top