Check 21
The Improved Method
for Processing
Checks |
| |
In late October,
an act known as the "Check
Clearing for the 21st Century Act" (H.R. 1474), or "Check
21", went into effect in Federal Law. This
legislation is designed to improve the efficiency of our
nation's check clearing system by encouraging electronic check
processing.
To accomplish this, a new legal document, the substitute
check, has been given the same legal standing as an
original check. A substitute check can be cleared
electronically and does not need to be physically shipped in
the clearing process.
A substitute check will have the following features:
|
| |
- An accurate image of the front and back of the original
check.
- A magnetic ink character recognition (MICR) line on the
document with all of the information from the original check.
- The statement "This is a legal copy of your check. You
can use it the same way as your original check."
- Specific criteria for paper stock and dimensions.
- Serve as legal proof of payment.
|
|
Currently, the original check is shipped to and from
institutions to clear. Electronic processing of substitute
checks will result in several efficiencies and improvements: |
| |
- Checks will clear faster.
- Account balances will be more accurate.
- Potential fraud will be detected much earlier
allowing for
faster investigation and resolution.
|
This law will affect anyone that writes a check as a method of
payment. As stated above, checks will clear faster and for the
most part eliminate the period of "float" -- the
time between writing a check and having the check actually
clear your account.
This will also shorten -- from days to hours -- the period of
time you have to stop payment on a check.
Please contact us at 303-337-1430 or via E-mail at
with any questions you may have. |
