What you should know:
A new federal law came into effect on October 28, 2004 -- The Check Clearing Act for the 21st Century, or Check 21. This new law will help make check processing faster and more efficient by removing the need to transport paper checks between the financial institutions.
Prior to October 28th, check clearing was an outdated and manually intensive process that relied on ground and air transportation to move paper checks between financial institutions before they could be paid. To expedite the clearing process, Check 21 introduced a new negotiable instrument called a Substitute Check -- a paper reproduction of an original check that must be accepted by every U.S. credit union and bank.
Here are the FAQs about Check 21:
Why do we need Check 21?
What is a Substitute Check?
A Substitute Check is a paper reproduction of an original check. It contains images of the front and back of the original and includes all endorsements. It is slightly larger than an original check because it contains information about who truncated it and who reconverted it into a substitute check. All Substitute Checks must be accepted as though they were original checks and must contain the language: "This is a legal copy of your check. You can use it in the same way you would use the original check."
What will happen to my checks?
What should I know to prepare for Check 21?
What are my rights if there is an error involving a Substitute Check? Check 21 grants "Expedited Re-credit Rights" to members who suffer losses due to Substitute Checks. These rights are as follows: