| Changes in
Check Processing that Will Affect Consumers Beginning
October 28, 2004
The Check Clearing For the 21st Century
Act, more commonly known as “Check 21,” will go into
effect on October 28, 2004. Check 21, a federal law
implemented through the Federal Reserve Board’s (“Board”)
Regulation CC, Subpart D, is designed to make the nation’s
check processing system faster and more efficient.
Today, banks must often physically move original paper
checks from bank to bank, a transportation process that
can be costly and inefficient.
By authorizing an instrument called a substitute
check, Check 21 will facilitate check truncation
and enable electronic check exchange. Rather than sending
a paper check from the depository institution to the
paying institution for collection, banks can capture
a picture of the front and back of the check with the
associated payment information and transmit the information
electronically. If the receiving bank or its customer
requires a paper check, the bank can use the electronic
picture and payment information to create a substitute
check. Under this new law, a substitute check
is considered the legal equivalent of the original check.
After October 28, 2004, some consumers and businesses
who have, to date, been receiving their original checks
back in their monthly account statements may receive
a combination of original and substitute checks. Those
that currently receive image statements (pictures of
several checks on one page) may receive some images
of substitute checks.
For more information about Check 21
The Boston Fed has compiled a list of questions
and answers designed to shed some light for consumers
on this new law. Additional questions may be directed
to the Federal Reserve Bank of Boston’s Consumer Hotline
at (617) 973-3755.
Boston Fed's presentation on
Check 21, made to the Boston City Council on October
12, 2004 (PDF)
Information
about Check 21 from the Board of Governors
Consumer
Guide to Check 21 and Substitute Checks
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