Check Clearing for the 21st Century Act

Frequently Asked Questions about Check 21

The Check Clearing for the 21st Century Act (Check 21) was signed into law on October 28, 2003, and became effective on October 28, 2004. Check 21 is designed to foster innovation in the payments system and to enhance its efficiency by reducing some of the legal impediments to check truncation. The law facilitates check truncation by creating a new negotiable instrument called a substitute check, which permits banks to truncate original checks, to process check information electronically, and to deliver substitute checks to banks that want to continue receiving paper checks. A substitute check is the legal equivalent of the original check and includes all the information contained on the original check. The law does not require banks to accept checks in electronic form nor does it require banks to use the new authority granted by the Act to create substitute checks.

The Federal Reserve Board has released the final rule to implement Check 21, including the model disclosure language for depository institutions to use in notifying consumers of their rights under the law.

* Final Amendments to Regulation CC to Implement the Check Clearing for the 21st Century Act

Report of the House Committee on Financial Services (90KB PDF)

Check 21 and Substitute Checks

To make check processing faster, many banks no longer send paper checks to other banks to receive payment. Instead, these banks exchange payment information electronically.
A federal law, known as Check 21 (effective October 28, 2004), makes it easier for banks to electronically transfer check images instead of physically transfer paper checks. Check 21 permits banks to replace original checks with "substitute checks." Substitute checks are special paper copies of the front and back of the original check. They can be processed as if they were original checks. The front of a substitute check should state: "This is a legal copy of your check. You can use it the same way you would use the original check." You can use a substitute check as proof of payment just as you would use an original check.

Front of Check

Back of Check
If your canceled checks are returned with your regular account statement or if you request copies of canceled checks, you may receive a mix of original checks and substitute checks.
Under state and federal law, you are protected against errors in your account, whether you receive canceled checks (original checks, substitute checks, or both) with your account statement, an account statement showing images of the checks you have written, or an account statement that simply describes your canceled checks.
If you receive a substitute check and there is a problem or error with the check that causes you to lose money, Check 21 provides a special procedure that permits you to ask for a refund (called an "expedited recredit"). This special procedure applies to substitute checks only. (See Consumer Guide to Check 21 and Substitute Checks.)

**Information and Images Courtesy of "The Federal Reserve Board"

***For further information please review The FRB website.

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Check Clearing for the 21st Century Act

Frequently Asked Questions about Check 21

Check 21 and Substitute Checks