Check 21 — Check Clearing for the 21st Century Act

What is Check 21?

The Check Clearing for the 21st Century Act, commonly referred to as "Check 21," became law on October 28, 2004. The purpose of Check 21 is to facilitate the broader use of electronic check processing without mandating that any financial institution change its current check collection process.

How does Check 21 affect me?

Check 21 is a new federal law that requires some changes in the way your paid checks are handled. Under the current law, a financial institution that presents a check for payment must present the original paper check, unless the paying and receiving financial institutions have agreed to accept electronic images. Check 21 removes the agreement requirement and allows a financial institution to convert a paper check into an electronic image. Check 21 facilitates the broader use of electronic check processing without mandating that any financial institution change its current check collection practices. Check 21 accomplishes this by authorizing a new negotiable instrument called a substitute check.

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What is a "substitute check?"
A substitute check is a legally sanctioned document with all the rights and obligations given to the original paper check written from your checkbook. At any point along the check clearing process, a financial institution may remove the original paper check and substitute an electronic image. Substitute checks are simply paper copies created from these electronic images of original paper checks (front and back, with all endorsements) and are suitable for automated processing in the same manner as the original paper check. Each substitute check must include a statement identifying it as a legal copy of the original paper check.

What does a substitute check look like?
A substitute check is approximately 3.75 x 8.5 inches long. It is larger than your original paper check, includes an image of your original paper check, and has a legal statement printed on it.

Will substitute checks be processed faster?
Check 21 will significantly reduce the amount of time required to move money out of your account and pay recipients of your checks. So your checks will clear faster and you will need to keep closer tabs on your accounts to make sure funds are available on time.

What happens to my original paper check?
In most cases, original checks are destroyed once the check is imaged. Check 21 does not regulate the retention of original paper checks. Check retention time periods are set by the financial institution.

What if I need a copy of my canceled check?
Just contact us and a substitute check will be provided.

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What do I do if there is an error involving a substitute check?
Immediately contact us if you suspect an error. Check 21 requires that we provisionally re-credit your account. We will send a disclosure statement soon with more precise details on your legal rights and how to make a claim.

What are the consumer protections?

The consumer protection provisions contained in Check 21 are called "expedited re-credit" provisions and pertain specifically to substitute checks. The expedited re-credit provisions provide a mechanism for a consumer to make a claim when a consumer feels that a substitute check was wrongfully charged against their account. There are specific steps for the consumer to follow when making the claim, and there are certain steps for the credit union to follow, as well as timetables built in for addressing a consumer's claim.

How much time do I have to report a suspected error?
You have 40 calendar days from the later of two dates-either the date when your statement was delivered or 40 calendar days from the date the suspect substitute check was made available to you.

How much time does the credit union have to address my claim?
Check 21 requires a credit union to re-credit your account no later than the end of the business day following the business day on which the credit union determined that claim was valid or on the tenth business day if the credit union has not yet determined the validity of the claim.

Does Check 21 preempt state law?

Yes. Check 21 is a federal law that supersedes any state law.

Does Check 21 apply to business checking accounts?
Yes. Check 21 applies to all types of checks - consumer, business, traveler's checks and U.S. Treasury checks.

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