You may be hearing about a new law called the Check Clearing for the 21st Century Act, better known as Check 21. This new law went into effect on October 28, 2004 and was designed to make the check clearing process faster and more secure.
Check 21 streamlines the check processing system by allowing financial institutions to take an electronic image, or picture, of your check, create a paper reproduction, and process the check electronically, rather than transport the check between banks by truck, train or airplane. This reproduction is called a Substitute Check and would be the legal equivalent of the original check.
Check 21 offers several benefits for both the consumer and the banking industry:
- Helps to catch fraudulent checks faster.
- Eliminates the risks of transporting paper checks, such as weather and theft.
- Checks clear faster, making your account balance more accurate.
Any U.S. check can become a Substitute Check, including personal checks, government checks, business checks, traveler’s checks, and money orders.
MCU is working to make the transition to Check 21 smooth for our members, but you still may have questions. To help you understand how Check 21 may affect you, please review the following FAQs:
No. You will continue to use your current paper checks and accept paper checks from others as you always have. You will notice that checks you write clear faster.
When an electronic image is created, your original check is taken out of the check clearing process. The processing financial institution can then destroy your original check. Each financial institution will determine their retention policy for the original check.
Substitute Checks are similar in size to original checks with a slightly reduced image of the front and back of the original check. The front states: “This is a legal copy of your check. You can use it the same way you would use the original check.”
You are able to use the copy MCU provides upon your request as proof of payment.
Yes, but you will see the Substitute Check image.
Say goodbye to float time, the period of time from when you write your check to when it is actually presented to your account for payment. Now when you write a check to say, your cable company, and it’s deposited promptly, the payment will clear your account in a day or two since the actual physical check does not have to be mailed back to your financial institution.
Check 21 will help reduce identity theft opportunities because it will reduce the amount of paper checks and personal information being transferred between financial institutions, and the amount of checks sent back to customers. Since all the checks are being imaged, those images can be posted securely online, and combined with eStatements, would completely eliminate statements and cancelled checks moving through the mail, along with the risk they will fall into the wrong hands. MCU has been providing check imaging to its members for several years, putting these security measures in place long before other institutions will be forced to through Check 21.
No. All financial institutions, including credit unions, are required to accept Substitute Checks.
Please contact the credit union immediately if you believe an error has occurred due to a Substitute Check. For complete disclosure information regarding your rights under the law regarding Check 21, please request our brochure “Substitute Checks and Your Rights.”
Yes, that type of transaction is referred to as “check conversion” and is the process of converting a paper check into an electronic fund transfer for clearing through the Automated Clearing House (ACH) network. The check is posted on your statement only as an electronic item, and there is no image of your check. This can occur:
- You send a payment in the form of a check to a company. The company then converts the check into an electronic transaction and clears it through the ACH network.
- You write a check at a store for an over-the-counter transaction. The cashier swipes the check to capture the account information and immediately returns the check to you. The transaction is then cleared electronically through the ACH network.
If you have any additional questions, please call a Financial Service Associate at 847-342-9300, ext. 2, or request more information online
