Check 21
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Check Clearing for the 21st Century Act ("Check 21") was passed by the United States Congress in October 2003 and becomes effective on October 28, 2004. The objective of Check 21 is to reduce the check payment system's dependence on physical transportation networks and to streamline the collection and return process.
Consumers should be aware of how Check 21 may affect them beginning on October 28, 2004. For example:
Payment processing time for checks may be reduced significantly. As a result, there may be little or no “float” time between when you write a check and when your bank deducts these funds from your checking account. To avoid paying bounced check fees, be sure that you have sufficient funds in your checking account when you write a check. Faster check processing times may affect you in other areas, such as your need to act promptly if placing a stop payment request with your bank.
Prior to the enactment of Check 21, if your check was deposited at another banking institution, the receiving bank would send the original paper check to your bank for payment from your account. Under Check 21, a receiving bank has the option of making an electronic image of the front and back of your original check. This electronic image becomes a "substitute check" which is submitted to your bank for payment from your account. The substitute check is the legal equivalent of the original check, so your bank may provide you with a substitute check, rather than your original cancelled check, as proof of payment.
Consumers should check with their banks for further information on how their institution plans to implement Check 21. To learn more about Check 21, you can click on the links listed below: