| Check 21 and
Your Checking Account
The Check Clearing for the 21st Century Act
(Check 21) became effective on October 28, 2004. Key details
are given below with additional information at the Federal
Reserve Board Web sites:
http://www.federalreserve.gov/pubs/check21/consumer_guide.htm
http://www.federalreserye,gQv/pubs/check21/shouldknow.htm
What is Check 21 and What is its Purpose?
Check 21, as a federal law, helps banks (credit
unions) process checks faster electronically, decreasing the
processing time and transportation costs. Currently, when
you write a check, it is sent from the payee's bank (the company
you wrote the check to) to a central check clearinghouse (usually
a Federal Reserve Bank) and then to your bank. If you have
an account that returns cancelled checks, the processed paper
checks are collected and returned to you each statement period.
Under Check 21 guidelines, banks can take a picture of the
front and back of your paper check and transmit payment information
electronically. If the customer requires a paper check, the
bank can use the electronic copy and payment information to
create a paper "substitute check." The new process
eliminates checks being physically transported from one bank
to another.
What is a "Substitute Check?"
A substitute check is a paper copy of the back
and front of your original check. Because it is a picture
of your check, the paper containing the substitute check might
be slightly larger than the original check. The statement
"This is a legal copy of your check," will be included
on the substitute check. Substitute checks can be used as
a proof of payment.
How will Check 21 Impact Consumers?
You will not get back some or all of your original
checks, because they will not be returned to your bank. Checks
you write now may clear faster than in the past.
- Read the Check 21 disclosure that arrives
with your checking account statement. Banks are required
to provide a disclosure statement to customers who receive
canceled checks with monthly statements no later than the
first statement mailing after Check 21 became effective
on October 28, 2004.
- Contact your bank to clarify any questions
you have about Check 21 after reading the disclosure statement.
Make written notes of your conversation and file it for
reference.
- Write checks only if you have sufficient
funds in your account.
- Substitute checks are the legal equivalent
of the original paper check. If you do not receive canceled
checks with your monthly checking account statements and
need a copy of a check for some reason, be sure to request
a "substitute check.."
- Know the difference between an image of
your check and a substitute check. Check images are not
governed by the Check 21 regulations. Image statements show
multiple checks on a single page.
- Know how "expedited recrediting"
works in case of improper payment. Under Check 21, if you
receive a substitute check you can make an expedited recredit
claim if a substitute check was improperly charged to your
account. Banks generally have 10 business days after a consumer
complains to recredit the consumer's account for amounts
up to $2,500 per check pending completion of an investigation.
Exceptions are made for new accounts, accounts repeatedly
withdrawn, and suspicion of fraud.
- Evaluate your checking account needs. A new
account might better suit your needs.
- Use duplicate checks to maintain a check
record if your canceled checks are not returned from your
bank.
- Carefully review your checking account statements
during the next few months as Check 21 is implemented. There
may be a few unanticipated wrinkles or problems. When you
are aware of problems, you can usually resolve them faster.
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