Check 21

The changes brought on by Check 21 will improve check collection by automating many high-touch procedures. The result should be faster, more efficient clearing and posting of check payments.

More Important Information

What is Check 21?
Why was Check 21 created?
What does Check 21 do?
What is a substitute check?
Is Check 21 mandatory?
When will Check 21 take effect?
Are substitute checks an acceptable proof of payment?
What happens to my original check?
What if I need a copy of my canceled check?
How will I benefit with Check 21?
What items are subject to Check 21?
How does Check 21 relate to electronic check conversion (e-check)?
What if there's an error involving a substitute check?
What are the implications for my account management practices?

What is Check 21?

In a nutshell, Check 21 (the Check Clearing for the 21st Century Act) allows banks to replace original paper checks with "substitute checks" that are made from digital copies of the originals.

Why was Check 21 created?

Check 21 was created to reduce the time, risks and cost associated with paper check processing.

Currently, checks travel on trains, planes, and automobiles during the clearing process. When Check 21 becomes effective, banks will be able to send digital images of checks electronically, eliminating the need to physically transport paper checks between banks. Check 21 will also reduce uncontrollable transportation delays that can be caused by weather or natural disasters.

What does Check 21 do?

Check 21 will create a more efficient check processing system, without changing the way consumers write checks. It simply requires banks and customers to accept paper copies of their original checks called "substitute checks."

What is a substitute check?

A substitute check is a paper copy of the digital image of your original check - both front and back, with all endorsements - and is about the size of a business check. Check 21 legislation sets standards for quality and allows for substitute checks to be legal copies of the originals. All banks must accept the substitute check as they would the original document.

Check processing will be faster with the implementation of Check 21. Funds may be removed from your account sooner than in today's system, therefore there will be less "float time." As always, make sure you have enough money in your account before writing a check.

Is Check 21 mandatory?

Check 21 does not mandate electronic processing of digital check images. It simply makes it possible. For banks that choose to process checks manually, a substitute check will be made of the image, which will be processed as if it were the original.

When will Check 21 take effect?

Check 21 was signed into law October 28, 2003 and becomes effective October 28, 2004.

Are substitute checks an acceptable proof of payment?

Yes, everyone must accept substitute checks beginning October 28, 2004.

What happens to my original check?

After taking a digital image, the bank may destroy your original check. If necessary, a substitute check may be created. Since substitute checks are legal copies of your original check, there is no need to save the original.

What if I need a copy of my canceled check?

Contact your bank. They will produce a copy for you. Also, many banks offer images of cancelled checks through their online banking service.

How will I benefit with Check 21?

• You may have earlier access to your funds and faster, more convenient access to information about your checks - such as online images.
• You'll have better fraud protection. Faster processing means faster detection and faster resolution.
• If you detect a problem because of a substitute check, Check 21 requires that the bank re-credit your account, pending an investigation.

What items are subject to Check 21?

All checks, including cashier's checks, payroll checks, personal checks and business checks are subject to Check 21. Savings bonds are not checks and therefore are not subject to Check 21.

How does Check 21 relate to electronic check conversion (e-check)?

Check 21 involves creating digital images of original checks, but they are still processed under the same laws and regulations as paper checks.

On the other hand, electronic check conversion, or e-check, occurs when a check is converted into an electronic funds transfer. The transaction is then routed through the Automated Clearing House (ACH) network, the same system used by Direct Deposit.

On your monthly statement, a substitute check will be listed with your other checks; an e-check will be listed with other electronic funds transfers, such as automated debits for health club memberships or a payment setup with a utility company.

What if there's an error involving a substitute check?

Check 21 requires that we provisionally re-credit your account, usually within ten business days, for any substitute check you receive and dispute. Please review your monthly checking account statements and contact us immediately if you suspect an error.

What are the implications for my account management practices?

Checks you write should clear sooner, raising the possibility that some checks will be returned NSF if there were non-sufficient collected funds in the account when you wrote the check. You should not write checks for amounts that can't be covered by funds already in your checking accounts.

More important information

For more information about Check 21, read "Where are my checks?" or contact your nearest Berkshire Bank office.

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