The Check Clearing for the 21st Century Act (Check 21) is a federal law that enables banks to handle more checks electronically, making check processing faster and more efficient. The Act, which took effect October 28, 2004, facilitates easier electronic transfer of funds by creating a “substitute check,” which is the legal equivalent of an original check.

Substitute Checks

Images of the front and back of the original check allow a substitute check to be processed as the original check. A substitute check is slightly larger than a standard personal check so that it can contain a picture of the original check. A substitute check must be printed in accordance with very specific standards so that it can be used in the same way as the original check.

The Increased Efficiency of Check 21

Check 21 eliminates the need to physically move paper checks from one bank to another. Traditionally, banks physically moved original paper checks from the bank where the checks were deposited to the bank that paid them. This transportation can be inefficient and costly.

Growth of the Use of Check 21

Check 21 applies to all US-Dollar checks drawn on a US-Bank with no exceptions, and no “opt-out” possibilities. However, the law does not require banks to accept checks in electronic form nor does it require banks to use the new authority granted by the Act to create substitute checks.

Increased Check Processing Speed with Check 21

The speed of check-processing has already increased due to various check-system improvements, and should continue to increase, over time. Therefore, money may be deducted from your checking account faster, so always make sure your checking account has enough to cover a check before writing it.

The federal Expedited Funds Availability Act specifies the maximum times by which banks must make funds available to customers and Check 21 did not change these times.

Check 21 Consumer Protection

Check 21 contains new protections for consumers, including a special refund procedure, “expedited recredit,” for a consumer who suffers a loss related to a substitute check they received.