What Is Check 21?

Check 21 is the common name for the Check Clearing for the 21st Century Act. It’s a new law that was recently passed by Congress and made a law when signed by the President of the United States (remember “I’m just a bill” of cartoons on Saturday morning). Check 21 basically streamlines the traditional system of check processing through the incorporation of new electronic technology. This new system replaces an outdated control system of compensation that banks and other financial institutions have used for many years. The advantage is the ability to reduce the time it takes for a check to clear from days to hours. The process of doing this involves a pseudo or substitute check. Check 21 now allows banks to use this instead of original checks. The technique to make this a reality involves the conversion of information on verification in an electronic file that is sent to the manufacturer’s financial institution for payment.

This speeds significantly offset verification process from days to hours. The original check may even be destroyed by a substitute check can be done at any time during the process. This image can be used as proof of payment just like the original check. In fact, the controls are concerned almost exactly like the original checks with the exception of a slightly reduced image of the front and back of the original check. You can expect to see a substitute check if the original check is converted to an electronic archive for the payment and the check turns out to be a check for insufficient funds in the account of the beneficiary.

The bad check you receive is really the substitute check. You may also receive a substitute check, if you request a copy of one of their own checks paid provided that the check was converted into an electronic archive during the checkout process. Do not worry, the Check 21 law allows you to use the substitute check the same way as if the original check initial transaction or payment. However, do not expect rapid deployment of electronic file conversion control immediately. Top financial institutions (such as banks and credit unions) or not to switch to replace paper checks due to high initial costs associated with investing in the equipment needed to comply with Check 21. Do not worry, but many financial institutions gradually will the new system and it will save money over time in the transport controls, improve safety and mitigate losses related to check fraud. Consumers are most affected by this new change in check clearing will be those individuals who write a check one day and then attempt to transfer money into the account the next day or writing a check a day earlier, after it was paid via direct deposit. This method of floating money will not be easy to duplicate, as in many cases, the electronic controls can be cleaned in a only 4 hours. So while some consumers may feel a call initial attention of many to embrace the new law is only based on the fact that it must reduce fraudulent activities currently seen in the financial industry.