What is Check21?

October 28, 2004, was the day when the ‘Check21’ law came into force. This Act is also known as 21st century act (or Check 21 Act). This Federal law was created to improve the Check processing capabilities of banks. In the traditional way of check processing, physical checks were transported from one bank to another. This process was very time consuming and also was expensive to for financial Institutions. The check 21 act allows the receiver of a physical check to create a digital copy which is also known as a ‘Substitute Check’. This digital copy can be easily forwarded from one financial institution to another using electronic mode of document transfer. This federal law has helped banks to process checks in a fast and more cost-effective manner. A properly created substitute check has the same value as a regular physical check.

Why is Check21 considered as a faster alternative to traditional paper checks?

Since the substitute check can be forwarded from one bank to another by the means of electronic medium, the processing of these checks can be way faster than the traditional checks.

The introduction of ‘check 21 act’ has certainly helped banks process a higher number of checks by implementing less physical resources. Banks also save money that used to be spent in the transportation of traditional paper checks.

To create a substitute check the bank captures the picture of the physical check. This picture includes the front and back side of the physical check. This substitute check must include all the vital pieces of information that are present on a regular check. Some of the vital information are.

• Account number
• Routing number
• Check number
• Amount
• To be paid to
• Paid by
• Signature

How Secure is Check21?

The US government approved this act after rigorous analysis and understanding of all the factors involved in a substitute check processing. This mode of payment shall be considered secure as it has been approved by the government after spending multiple days and months of process understanding and implementation.
Even after implementation of check 21 the account holders can still utilize the traditional paper checks if they wish. The payer must maintain sufficient balance in the account so that the electronic check or check 21 transaction clears without any NSF errors.

As per the guidelines of the government and relevant agencies, the substitute check should be a little bit larger than the regular check in terms of size. Both sides of the physical check should appear on the substitute check. The substitute check should show the front and the back of the physical check properly.

The substitute check must have this term mentioned on the page that shows the front of the physical check
“This is a legal copy of your check. You can use it the same way you would use the original check.”

Proper care should be taken in ensuring that the substitute check clearly shows the front and the back of the paper check. Every piece of information should be clearly visible.

Check 21 has the same value as a regular check. It can also be considered as a proof of payment. Most of the government agencies and merchants accept payments by the echeck mode.

Consumers are highly protected while using check 21. In case if it appears that the substitute check is not valid and the consumer has experienced financial loss then they can file a claim on the bank. Consumers will have to provide additional information that shall be verified by the financial institution. Claim request should be made in less than 40 days from the time of receiving the substitute check. If the claim is found to be valid then the bank resolves the dispute within 45 days by issuing a refund.