Checking In on “Check 21”

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

Before Check 21, most checks had to be physically transported--whether across town or across the country--before they could be cleared. This is expensive and time-consuming. Check 21 provides for legal acceptance of a paper reproduction in place of the original check. The "substitute check" and is produced from a digital image of the original. After taking a digital image, the bank may destroy your original check. Since substitute checks are legal copies of your original check, there is no need to save the original. 

What Did Check 21 Do?

Since October 28, 2004, every bank has been required to accept substitute checks. If you had been receiving your canceled checks or electronic images of them with your account statement, you began seeing substitute checks after that date. 

All checks, including cashier's checks, payroll checks, personal checks, and business checks are subject to Check 21. Other paper instruments such as savings bonds are not checks and are not affected. 

Check 21 also protects check-writing consumers with new safeguards. The increased speed check clearing means check fraud can be discovered faster, which means less damage and quicker resolution for victims. You may have earlier access to your funds and faster, more convenient access to information about your checks (such as online images). A bank that creates a substitute check must warrant that it is accurate and produced in accordance with industry standards for quality. If you detect a problem caused by a substitute check, Check 21 requires the bank to re-credit your account, pending an investigation. 

Other E-Payments:

You may already have experienced two other payment practices transformed by their use of the Check 21 automated clearinghouse (or ACH) system: 

• A retailer converts a paper check into an electronic ACH payment on the spot. 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.
• Recurring payees from your account (i.e. telephone, utilities, credit card providers) convert your check payments into ACH payments. The payment will be reflected in your bank statement, which becomes the legally accepted proof of your payment.

 The above transactions don’t use Check 21’s substitute checks, but allow for faster payment processing and even better service to the nation's banking customers.