| On October 28, 2004, a new law known as Check 21 went into effect to improve the overall efficiency of the nation's check payment system by eliminating the need to physically transport paper checks between banks. Charter Oak Bank would like to help familiarize you with how Check 21 will improve the way banks process checks.
What is Check 21?
Simply stated, Check 21 legislation allows banks to replace original paper checks with substitute checks that are made from digital images of the originals.
Why was Check 21 created?
Check 21 was created to reduce the time, risks and costs associated with paper check processing and transportation. Traditionally, banks rely on physical transportation -- such as planes and trucks -- to deliver checks between banks for payment.
Check 21 allows original paper checks to be removed from the collection process and be replaced with substitute checks created from digital image files. Banks can send check images electronically, reducing dependence on transportation that can be impacted by uncontrollable delays, such as weather or natural disasters.
What does Check 21 do?
Check 21 streamlines and improves check processing without requiring customers to change the way they write checks. It simply requires banks and customers to accept paper reproductions of original checks. These reproductions are called substitute checks.
What is a substitute check?
A substitute check is created by a bank and is a paper reproduction of a digital image of an original check. The substitute check contains an image of the front and back of the original check and conforms to banking industry standards for quality.
What does a substitute check look like?
Here is an example of a substitute check.
Do I have to accept substitute checks as proof of payment?
Yes. Once a paper check is converted into a substitute check, it becomes the legal equivalent of the original paper check. Any bank or person must accept them as if they were the original checks.
Which checks are eligible to become substitute checks?
All checks are eligible for conversion to a substitute check including, but not limited to, consumer checks, money orders and travelers checks.
What happens to my original check?
Since there are no requirements governing the retention of original checks, they may be destroyed once digital images of the original checks have been made. A substitute check made from the digital image becomes the legal substitute for proof of payment.
Am I allowed to 'opt out' of Check 21?
No. Check 21 legislation applies to all financial institutions and their customers. There are no "opt out" exceptions.
When will I encounter substitute checks under Check 21?
If you receive cancelled checks or check images with your Charter Oak Bank statement, you may receive a combination of your original cancelled checks and some substitute checks.
If you have check safekeeping and your cancelled checks are stored at Charter Oak Bank, images of substitute checks may be stored in place of the original checks.
If you have online access to your account transactions, images of your checks and substitute checks will be available for viewing.
What other impact will Check 21 have on me?
With Check 21, checks will be processed more quickly, which may result in funds being withdrawn from your account sooner than in today’s environment. |