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CHECK 21 – How Will It Affect You?


Q. Check 21: What Is It?

A. The Check Clearing for the 21st Century Act – or “Check 21”. It was created to bring the nation’s check payment system into the digital age and allow consumers to benefit from better and faster financial services. Check 21 was created to improve the existing system that forces over 40 billion checks a year to be exchanged physically and transported around the country before the payment cycle is completed.

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Q. When Did Check 21 Become Effective?

A. Check 21 became effective on October 28,2004. As of this date, all financial institutions will have to accept substitute checks the same way they are required to accept paper checks.

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Q. How Does Check 21 Benefit Me?

A. There are several ways you benefit from Check 21:

  • Fraud is detected faster since checks clear faster.
  • You get a more accurate picture of your account balance.
  • Check images can be accessed faster to resolve questions.
  • Checks are more secure since they do not have to be physically transported.

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Q. What is a Substitute Check?

A. A substitute check is a digital picture of your original check (showing the front and back with a magnetic ink character recognition line and all of its routing data) which can be processed electronically. A substitute check is the legal equivalent of your original for all purposes including requirements of state and federal law. You may receive a substitute check when you request a copy of your check.

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Q. How Is The Consumer Protected?

A. If a consumer believes that a substitute check was not properly payable, he or she may file an “expedited re-credit” from the paying financial institution. The financial institution must investigate any claim and in most cases either resolve the claim within 10 business days, or provide the consumer with an expedited re-credit of up to $2,500,000 pending completion of the investigation. Generally, 45 days is the limit to conclude the investigation and make a final determination.

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Q. How Does Check 21 Affect How I Pay My Bills?

A. Since these changes reduce the amount of time it takes to move money form your account to pay your bills, you will need to have sufficient funds in your account to cover the payment at the time you write the check. In other words, it drastically reduces the “float” time of the check.

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