Check 21

What is Check 21?
The Check Clearing for the 21st Century Act, or Check 21, was passed by the Federal Reserve to reduce the amount of paper moved between financial service institutions.  It allows the use of a “substitute check” to be used for the purpose of processing instead of the physical paper check.

When does it go into effect?
Check 21 was passed on Oct. 28, 2003.  It became effective on Oct. 28, 2004.

What is a “substitute check”?
A “substitute check” is a copy of an original, paper check.  Each copy, also referred to as an image replacement document (IRD), includes an accurate image of the front and back of the check. It contains all the information that a paper check does and can be used to collect payment or file a refund claim.  Once Check 21 is enacted, an IRD will be a legal copy of a check and will be processed just as a check would. 

How will checks be processed after Check 21?
Check 21 will minimize the time it takes a check to travel between banks and to clear.  After Oct. 28, member checks will go through the following.  A member writes a check to a designated payee.  The check is deposited at the payee’s financial institution.  The paper check is then sent to a check processor, who will create an image of the check.  From this point, the check will be transmitted electronically as an image until it arrives back to the member’s Advancial account. 

How does Check 21 affect check “float” time?
Checks will clear in fewer days.  In the past, checks had to be mailed between financial institutions, processors and clearing houses.  Because checks can be sent and processed electronically, they will now be processed much faster and “float” time will be greatly decreased.  Checks that took days to clear in the past may now clear in matter of hours.

How will Check 21 affect me?
As an Advancial member, the effects of Check 21 will be minimal.  For more than a year, Advancial has provided our members with digital check images, viewable on cuAnywhere, instead of paper cancelled checks.   We will continue to make these images available to all of our members. If you need a copy of a check posted on your account you will receive a copy of the check image – as you do today.  It will contain all the information necessary to verify or dispute a payment.

Because IRDs can travel electronically, Check 21 will also increase the efficiency of check processing.  This will decrease the “float” time of a check and help to prevent fraud to Advancial or your account.

What are the benefits of Check 21?
Check 21 will allow checks to be processed more quickly and, therefore, reduce fraud.  It will also lower the risks involved with transporting checks.

Will this affect cuAnywhere^® Online Banking check images?
No, check images will still be available on cuAnywhere as soon as they clear. 

For more information regarding Check 21, visit the Federal Reserve at http://www.federalreserve.gov.