CHECK CLEARING FOR THE 21st CENTURY ACT

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CHECK CLEARING FOR THE 21st CENTURY ACT

• Anna Gage
• Eric Hoffman

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Check 21

• Faster process of clearing checks
• Effective October 28, 2004

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How it works

• Electronic vs. physical clearing process
• Not the same as ETF
• Truncation
• Check could be destroyed
• Replaced with electronic image or Substitute
  Check

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Substitute Checks

• Legal Equivalent of an original check
• Must be accepted as payment

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The Substitute Check

• Checks must hold the same information
• Image of front and back of check
• All applicable endorsements

• The MICR line
• Required disclosure

Source http//www.federalreserve.gov/paymentsyst
ems/truncation/faqs2.htm October 30, 2004
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The Substitute Check (contd)

• Must conform to size and content standards
• Must be handled by a bank

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Changes to the Clearing Process

• Receiving Bank Requirements
• Banks that dont accept
• Reconverting Bank

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Consumer Issues

• Original Paper Checks
• Checks Written Will Clear Sooner
• Bank Fees
• Banks Save money on processing

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Consumer Issues (continued)

• Does Not Shorten Check Hold Times
• Check Fraud

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Questions

• 1.) The bank that removes an original check from
  the check clearing process is known as
• a.) Reconverting Bank
• b.) Substituting Bank
• c.) Truncating Bank
• 2.) Check 21 allows consumers faster access to
  their funds from deposited checks.
• True or False
• 3.) An electronic image of an original paper
  check legally equivalent to an electronic funds
  transfer.
• True or False