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What is Check 21?Check 21 is a law that allows financial institutions to send, receive and process electronic images of checks instead of transporting the paper checks to the clearing bank. Any financial institution within the payment process may create an image of the physical check in its place. If an institution elects not to accept images, a substitute check will be created. Why did Congress vote Check 21 into law?When all of the flights in the U.S. were grounded after 9/11, it became evident that the nation needed to clear checks without shipping barrels of paper all over the country. This law allows financial institutions to scan deposited checks into an image and exchange them for payment versus presenting the original paper document. This process is called image exchange. Though this law does not require every financial institution to send or accept images, it does provide an easier and safer process of clearing checks with no need for the paper to be physically moved through the system. If a financial institution does not accept a check image, the law requires the financial institution to accept substitute checks instead. When did Check 21 go into effect?President Bush signed the law on October 28, 2003, and it became effective October 28, 2004, twelve months after enactment. What is a substitute check?A substitute check is the document created as a result of image exchange. Some financial institutions, equipped with imaging technology, scan the deposited checks and send the image instead of the actual check for clearing. If an institution does not accept a check image, the image is converted into a paper document called a substitute check. Also, if a check is not able to clear because there are not sufficient funds in the account, it will be returned to the depositor. When an imaged check does not clear due to non-sufficient funds, (NSF), the person to whom the bad check is returned receives a substitute check instead of an actual check. Does Security Service participate in image exchange?Beginning in February 2008, Security Service will begin transmitting check images. Is a substitute check a legal copy?Yes. A substitute check is a legal equivalent of the original check. Each substitute check must bear the following language: "This is a LEGAL COPY of your check. You can use it the same way you use your original check." Can I opt out of Check 21?No, federal law requires all financial institutions, consumers, businesses and government agencies to accept substitute checks as if they were original checks and provide copies of these checks to members upon request. Are any checks exempt from Check 21?No, all retail, non-retail, government and treasury checks are subject to this federal law. What if I need to show proof of payment?A substitute check is a legal equivalent of an original check for all purposes of providing proof of payment. We can provide you with a photocopy of the substitute check, which by law is sufficient proof of payment for all businesses and agencies. What do substitute checks look like?They are the size of a business check. They are printed on a check stock so the paper is slightly thicker than copy paper. This is an example of the front of a NSF substitute check. It has a copy of the front of the original check and language stating, "This is a legal copy of your check. You can use it the same way you would use the original check." Also, the MICR line is reproduced below the image of the original check. 
This is the back of a substitute check. It has a copy of the back of the original check and any additional endorsements after the check was turned into a substitute check. 
Because of Check 21, what changes might I see with regard to my Security Service checking account?The time it takes for a check to clear your account may decrease. Therefore, when writing a check you will need to be sure you have enough funds in your account to cover the amount of the check. You may have less time to place a stop payment on a check due to faster clearing time. When requesting a check copy, you may receive a substitute check, which carries all of the information from your original check. If a check is presented and returned because of non-sufficient funds, you may receive the returned check in the form of a substitute check. Is there anything I should do differently regarding my Security Service checking account?No. Accurately maintaining your checking account records and reconciling your statement in a timely manner as you have in the past will help prevent non-sufficient fund fees At Security Service we offer many free services to assist you in maintaining your checking account quickly and accurately:
How do I dispute an error on my checking account?If you believe that you have suffered a loss relating to a check being posted to your account incorrectly, please contact the Risk Management department at: Security Service Federal Credit Union  |
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