What is Check 21?

Check 21 is a federal law that impacts the way financial institutions will process checks.

Check 21 enables financial institutions to speed up check processing by creating and transmitting electronic images of checks known as substitute checks, which is a paper copy of the front and back of the check created from a scanned image. It is slightly larger than the check and contains the following information:

• An image of the front and back of the check
• All the information from the original check
• Information on how the check was deposited
• A statement indicating that the image is a legal copy of the original check

How does it work?

Once a check is deposited, financial institutions can create an electronic image of the check and trasnmit the image 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 also provides a special procedure that allows consumers to request a refund for losses suffered if a substitute check was posted incorrectly to their account. This only applies if the account problems are based on how a check was converted to a substitute check. In this case, the financial institution will provide a disclosure to outline the process and guidelines for procesisng requests for expedited re-credit.

What does it mean to me?

Check 21 does not affect the way you write checks, just the way your financial institution processes them. Checks will however clear faster and with faster check clearing, financial institutions may be able to detect check fraud faster.