Shown above is an example of how a substitute check may look.
What is the Check Clearing for the 21st Century Act?
The Check Clearing for the 21st Century Act, otherwise known as Check 21, was passed in October 2003. It is a federal law that works to improve the efficiency of the nation’s payment system.
This law was passed to reduce the dependence of the check clearing system on physical transportation networks, such as trucks, planes and trains. These networks experience unexpected interruptions, such as natural disasters and bad weather, that cause delays in the transporting and
processing of the checks.
Instead of physically transporting the checks, a “substitute check”, which is a digital image of the original check, is created and sent electronically. An example of how a substitute check may look is shown above. These substitute checks are similar to the images you have been receiving in your account statements since 2002.
As of Oct. 28, 2004, every financial institution is required to comply with this law.
What does this mean for you as a customer?
- Faster check clearing. Check 21 helps speed check clearing so check fraud can be discovered faster. Faster fraud detection means faster resolution for you.
- Same processing and statements. The State Bank of Alcester has been using check imaging, which creates electronic images of your canceled checks and other transactions since 2002. The only difference you will see on your statement is the substitute check, which looks a little different than the original check.
- Different images. The substitute check may not be the same size and may not look like the check you originally wrote, but you’ll be able to use it to prove that the check was written and cleared through the system. In fact, it is the legal equivalent of the original check. You may also notice a combination of original check images and substitute check images on your statements.
- Reduction in "float" time. The amount of time required to move money out of your account and to pay the recipients of your checks, otherwise known as "float", will be significantly reduced. You will want to make sure the funds are available in your account before you write a check to ensure the availability of funds and to avoid overdrafts.
How does Check 21 affect the possibility of someone stealing
your identity or using your account to write fraudulent checks?
Relying on check images should make it less likely that an identity thief will come into possession of the personal financial information located on your check. Under Check 21, original checks are physically removed from the system and replaced with an electronic version. This limits human contact with your financial information and reduces the processing time, which means you should be able to identify fraudulent items faster.
What does Check 21 mean for businesses?
Businesses may experience an increase in non-sufficient funds checks immediately following the implementation of Check 21 as consumers adjust to the reduced float time. Due to the reduced float time, businesses will also want to ensure that funds are available in corporate accounts before checks are written to avoid overdraft charges and returned checks.
What if you need to prove you paid for something?
Substitute checks are the legal equivalent of the original check under both state and federal law. Just contact the bank to provide you with a copy of the check you need.
