Consumer Protection News:
Check 21: Q's and A's

What is Check 21?

Check 21 is a federal law that went into effect on Oct. 28, 2004. Under the new law, banks can create and send digital images of paper checks. Instead of shipping the paper checks from bank to bank to complete the check clearing process, banks will be able to send the digital images electronically.

As a result of this new process, your bank may not be able to give you the original check anymore; it may only have a digital image of it. However, banks may create "substitute checks" using the digital images of the original paper checks.

What do I most need to know about Check 21?

• As always, when you write a check, make sure you have money in your account to cover it. Under Check 21, checks will be processed more quickly, which means the checks you write may be deducted from your account more quickly than in the past.

• You may not be able to get your original check back. Under Check 21, banks can process checks by creating and sending digital images of checks, which means your bank may only have a digital image of the check you wrote.

• However, you will be able to get a "substitute check" that will be legally sufficient for all purposes. Under Check 21, your bank can use the digital image to create a paper "substitute check," which replaces the original. You can use it for any purpose that you could have used the original, such as, for example, proof of payment.

• If your bank has been giving you cancelled checks with your account statements, it will continue to do so. However, some of the cancelled checks you receive may be substitute checks, rather than originals.

• Under Check 21, if something goes wrong with a substitute check, you have certain rights to get the error corrected. If you are charged twice for the same check or if a problem with a digital image or substitute check results in an erroneous charge, there is a special refund process.

• If you deposit a check, the funds may not be available for withdrawal any sooner (though that may change in the future). Check 21 does not change the laws governing funds availability, but as checks clear faster, banks may begin to make funds available sooner. For now, the general rule will still be that local checks must be available for withdrawal on the second business day following the deposit, and non-local checks must be available for withdrawal on the fifth business day following the deposit.

What is a substitute check?

A "substitute check" is a special paper copy of the front and back of an original check. Importantly, not all copies of checks are substitute checks. For example, pictures of multiple checks printed on a page and included with your monthly statement are not substitute checks. Online check images and regular photocopies of original checks are not substitute checks, either.

A substitute check is the legal equivalent of the original check for all purposes.

A substitute check may be slightly larger than the original check, but it must be specially formatted so it can be processed as if it were an original check. It must contain an image of the original check and must conform to certain standards. Among other things, the front of a substitute check should state: "This is a legal copy of your check. You can use it the same way you would use the original check."

Does Check 21 relate to electronic checks?

No. Electronic checks occur when a check is converted into an electronic funds transfer or an ACH ("Automated Clearing House") transfer. This conversion may be performed by a credit card company or by a merchant that receives a check for payment. Electronic checks and other electronic funds transfers are routed through electronic networks that are separate from the check clearing process and subject to different rules. An electronic check may be processed faster than a regular check.

Do all banks have to adopt Check 21?

No. Check 21 does not require a bank to change its current method of check processing or to process checks electronically. However, all banks are required to accept substitute checks for payment and to inform their customers about substitute checks.

What happens to my original checks?

Banks can either process your original checks for collection (as they have in the past) or they can destroy original checks after making digital images of them.

Can I still get my cancelled checks back in my account statements?

If your bank has been giving you cancelled checks with your account statements, the bank will continue to do so unless it notifies you otherwise. However, some of the cancelled checks you will receive may be substitute checks that your bank made or received from other banks. Banks are not required to keep original checks or to return original checks to you.

If you request an original check from your bank, the bank may provide the original check if it has it, or a substitute check. If a bank gives you a cancelled substitute check (instead of the original check) it must provide you with information describing what a substitute check is, and what to do if there is a problem with the substitute check.

What happens if there is an error with a substitute check?

Check 21 provides a special process that allows you to claim a refund (known as an expedited recredit) when you receive a substitute check from a bank and you think there is an error because of the substitute check. For example, you may find that a poor quality copy caused a $10 check to be mistaken for a $100 check, or you may think that you were charged twice for the same check.

If you notice a problem with a substitute check, you should contact your bank as soon as possible. In general, to use the special refund procedure, you should contact your bank no later than forty days from the date your bank provided you with the substitute check or the date of the statement that shows the problem. You must submit your claim, along with information necessary for the bank to investigate it, in writing.

You may use the special process to get a refund of the money you lost. The amount of your refund under the special process is limited, but you may have the right to recover additional damages under other laws.

What if this process doesn't work or I have another problem?

If you unable to resolve your problem after contacting the bank, you may contact the OCC's Customer Assistance Group at 800-613-6743 or at customer.assistance@occ.treas.gov. You can learn more about the OCC's Customer Assistance Group on the Internet at http://www.occ.gov/customer.htm.