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A new federal law called Check 21, or Check
Clearing for the 21st Century Act, will begin
to change the way your checks will be processed
for payment, and will make a copy of a canceled
check the legal equivalent of the original.
Check 21 is a law that goes into effect
on October 28, 2004. It allows any bank or financial
institution that processes your check to replace
it with a "substitute check" -a copy
made from a digital image of the original.
Banks will no longer need to rely on paper checks
for the check clearing process. Rather than physically
transporting original paper checks to each other,
banks may exchange substitute checks created from
electronic images instead.
Check 21 is designed to increase the
efficiency and security of check processing. By
allowing check images to travel across the country
electronically, it will result in:
- Enhanced security and faster detection of
fraud
- Less paper to process and store
- Reduced vulnerability to disruption due to
weather or other events
- Faster clearing of payments by check.
Citizens Business Bank is ready to assist our
customers through this transition by answering
your questions and concerns, and by providing
alternative products and services to check writing
and processing.
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| What
is Check 21? |
Check
21 the Act is legislation that allows banks to substitute
a machine-readable copy of a check ("a substitute
check") for the original check for collection
or return. This allows banks to process checks electronically
rather than by transporting them via truck, train
or airplane. Substitute checks that meet the requirements
of the Act will be the legal and the practical equivalent
of the original check. |
| 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 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.
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| 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: |
Front:
Back:
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| 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, except foreign 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? |
There
are no requirements governing the retention of original
checks by the bank that converts the item into a
substitute check. Original checks will most likely
be destroyed after a short period of time by the
bank originating the substitute check. 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.
Once Check 21 legislation goes into effect in October
28 2004, it will apply to all financial institutions
and their customers. There will be no "opt
out" exceptions. |
| When
will I encounter substitute checks under Check 21? |
After
October 28, 2004, you can expect the following:
- If you receive cancelled
checks or check images with your Citizens Business
Bank statement, you may receive a combination
of your original cancelled checks and some substitute
checks.
- If you have On-Line Banking
access to your account transactions, images
of your checks and substitute checks will be
available for viewing.
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| 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. |
