What is Check 21?
The official name of Check 21 is “Check Clearing for the 21st Century
Act”. The new Act was passed by congress in the summer of 2003 and
signed into law by President Bush on October 28, 2003. The new law goes
into effect on October 28, 2004. Check 21 provides for the creation of a
new negotiable instrument known as a “Substitute Check”. |
What are the benefits of the new Act?
There are several benefits that will be realized for both credit unions
and credit union members including:
* Provides for faster collection, return of check
* Eliminates the risk of transporting documents (transportation risks,
weather, etc.)
* Removes the legal barriers to truncation, encouraging financial
institutions to begin using image technology/electronification
* Improves the efficiency of the U.S. payment system |
What is a Substitute Check?
A Substitute Check is a paper reproduction of the original check. The
Substitute Check is created from an image of the original check and also
must:
* Contain an image of the front and back of the original check;
* Bear a MICR line containing all the information appearing on the MICR
line of the original check;
* Conform in paper stock, and otherwise with generally applicable
industry standards for Substitute Checks; and
* Be suitable for automated processing in the same manner as the
original check.
Substitute Checks have been referred to as IRDs or Image Replacement
Documents. The terms are interchangeable but the Act specifically refers
to these new items as Substitute Checks. |
Is a Substitute Check a real check?
If a Substitute Check meets all the legal requirements of the original
check, then the Substitute Check is indeed a real check and possesses
the same legal equivalence of the original check. No financial
institution can refuse to pay a Substitute Check. |
When could a Substitute Check be encountered?
Since all of METRO’s Checking Accounts are “Check Image Statements”,
there will be no difference or change in the way the statement looks.
METRO members are already accustomed to seeing an image copy of their
checks. The only change is the text to the left of the image, and the
check itself is slightly smaller. (See sample on the right.) Members may
also encounter a Substitute Checks when a check copy is requested or
when a deposited check is returned.
For more information please see a METRO Federal Credit Union
representative. |
| Sample
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