About Check 21
In today's payments process, paper checks must be physically moved from where the check is deposited to the financial institution that pays the check. This process can take several days, sometimes weeks to complete. The wait and cost of moving checks will decrease with Check 21, the new federal law for financial institutions effective as of October 28, 2004.
Check 21 does not change the way checks are written, but rather how they are processed by financial institutions. By enabling financial institutions to scan checks and send images to electronic processing, Check 21 will create a more efficient check processing system.
Check 21 Myths & Realities
The first step to understanding Check 21 is to identify facts and common misperceptions about the legislation. For example, a common misperception is that Check 21 requires check imaging or that all financial institutions accept checks electronically. In reality, Check 21 simply provides new options for check processing. |
Common Myths about Check21
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The legislation Mandates the use of check imaging |
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Check 21 Authorizes image exchange |
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Retailers are required or mandated to handle check conversion at the point-of-sale |
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Check 21 Realities
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Checks aren't going away. Check 21 supports the use of checks by creating a more efficient processing system. |
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With a more streamlined process, checks will clear faster. |
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Check 21 will help financial institutions to more quickly detect check fraud. |
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Check 21 changes will be gradual because check imaging requires long term planning. |
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About Substitute Checks
Check 21 enables financial institutions to speed up check processing by creating and transmitting electronic images of checks known as "substitute checks." A substitute check is a paper copy of the front and back of the original check created from a scanned image. It is slightly larger than the original check, and contains the following information:
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An image of the front and back of the check |
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All the information found on the original check |
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Information on how the check was deposited |
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A statement indicating that the image is a legal copy of the original check |
Here's how it works:
Once a check is deposited, financial institutions can create an electronic image of the check and transmit the image called a substitute check to another financial institution for processing. Check 21 provides the rules and guidelines for the use of substitute checks and provides protections to those who may receive a substitute check.
Substitute checks can be used for record-keeping or proof of payment the same way as the original check. Check 21 provides a special refund procedure (called "expedited re-credit") if a party receives a substitute check and there is an issue or error with the account. Each financial institution will provide information on how this new refund procedure will work.
Here's an example that might be seen in statements. In most cases, the actual image of the check design will only be shown in black and white to make it easier to read the written portions of the check after the check imaging process.
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What Check 21 Means to you
Although Check 21 is effective for financial institutions as of October 28th 2004, not all consumers and small businesses will see changes immediately. Some financial institutions will be early adopters of new check imaging technologies and others will implement changes more gradually.
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For Financial Institutions
Check 21 will impact every financial institution in one way or another, since they must be ready to accept check images from other financial institutions. It is essential that financial institutions understand and adapt to the new regulations and requirements, and make necessary adjustments to their check processing systems.
Top priorities include
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Educating employees and customers about Check 21 |
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Preparing internal check operations to receive or accept substitute checks |
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Communicating to customers about their protections under Check 21 |
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Planning for the future on how Check 21 could be implemented |
For Consumers
Consumers will not see a difference when they write checks, but they will notice the effects of processing changes under Check 21.
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Checks will clear faster. For example, a check deposited in New York from a bank in Los Angeles may be posted in a matter of hours rather than days. |
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With faster check clearing, financial institutions should be able to detect fraud faster. |
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Consumers will likely have more options in viewing bank statements electronically. |
For Small Businesses
Check 21 does not require small businesses to change the way they make deposits or accept checks from customers. All checks drawn on U.S. financial institutions are eligible for electronic processing with Check 21. Changes small businesses may see include:
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A faster return and collection of checks |
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Quicker access to revenue from customers who pay by check |
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Alternatives for returning checks in monthly statements, providing options for secure storage of images or substitute checks |
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Some financial institutions will use Check 21 as the opportunity to promote new services or deposit options designed for small businesses. |
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Top Our Response to Check 21 Legislation
The impact of Check 21 will become more apparent as an increasing number of financial institutions begin to utilize electronic processing of checks. As your trusted printer, we are making every possible effort to assist financial institutions and customers adapt to this new legislation.
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Here are some of the ways we are preparing for Check 21:
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Product and image quality: our products are designed and tested to meet industry standards |
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Check Security and Fraud Prevention: existing and new security features are being tested to ensure that checks will remain one of the most popular and safe methods of payment. |
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Education: as the legislation develops, we will try our best to update you on possible changes and implications so you can prepare yourself for a smoother transition |
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