Clearing Act for the 21st Century (Check 21)
signed into law by President Bush October 28,
2003 and will become
effective October 28, 2004. Check 21
permits banks to replace
original paper checks with "substitute checks"
that are made from
digital copies of the originals.
Today the entire banking system processes over 40
annually. This new banking legislation will be
changing how banks
may exchange these same items and utilize new
October 28, 2004 every bank will be required to
checks, just as they currently accept your
original paper checks.
When you receive electronic images of your
canceled checks with
your account statement, you could also start
seeing images of
substitute checks after that date.
Listed below is a Check 21 Fact Sheet, that
explains key features
of this new legislation. Our bank website...
www.mountainvalleybanking.com contains a
brief video presentation
that explains this change in check collection as well.
imaging technology by Mountain Valley Bank has
well for these upcoming changes. Today, customers receive imaged
copies of their original checks with their monthly statements, or can
view those same images with their computer through our on-line
Check 21 Fact Sheet
What is Check 21?
In a nutshell, Check
21 (the Check Clearing for the 21st Century Act)
allows banks to replace original paper checks with
checks" that are made from digital copies
of the originals.
Why was Check 21 created?
Check 21 was created to reduce the time,
risks and costs associated
with paper check processing.
Currently, checks travel on trains, planes and
automobiles during the
clearing process. When Check 21 becomes
effective, banks will be
able to send digital images of checks
electronically, eliminating the
need to physically transport paper checks between
banks. Check 21
will also reduce uncontrollable
transportation delays that can be
caused by weather or natural disasters.
need for this new law became apparent after the
tragic events of
9/11. Because planes were grounded for several
days, our nation's
check processing system came to a halt,
interrupting cash flow for
millions of individuals and businesses.
What does Check 21 do?
Check 21 will create a more efficient
check processing system, with-
out changing the way consumers write checks. It
banks and customers to accept paper copies
of their original checks
called "substitute checks."
What is a substitute check?
A substitute check is a paper copy of the
digital image of your
original check -- both front and back,
with all endorsements -- and
is about the size of a business check.
Check 21 legislation sets
standards for quality and allows for
substitute checks to be legal
copies of the originals. All banks must
accept the substitute check
as they would the original document.
How will Check 21 impact me?
If you receive your imaged canceled checks
with your statement, you
may also receive some substitute checks.
There will be less "float
time," particularly for out-of-town checks.
Because check process-
ing will be faster with the implementation of
Check 21, funds may be
removed from your account sooner than in today's
always, make sure you have enough money in your
writing a check.
Is Check 21 mandatory?
Check 21 does not mandate electronic
processing of digital check
images. It simply makes it possible. For
banks that choose to
process checks manually, a substitute check will
be made of the
image, which will be processed as if it
were the original.
When will Check 21 take effect?
Check 21 was signed into law October 28,
2003, and becomes
effective October 28, 2004.
Are substitute checks an acceptable proof of
Yes, everyone must accept substitute
checks beginning October 28,
2004. In fact, digital images of
cancelled checks have been accepted
as proof of payment by the courts and the
IRS for decades.
What happens to my original check?
After taking a digital image, the bank may
destroy your original
check. If necessary, a substitute check
may be created. Since
substitute checks are legal copies of your
original check, there is no
need to save the original.
What if I need a copy of my cancelled check?
Contact the bank. We will produce a copy
for you. Or, you may be
able to print it yourself if you are using the
service. Again, check images have been
accepted as proof of
payment by the courts and the IRS for decades.
How will I benefit with Check 21?
* You may have earlier access to your
funds and faster, more
convenient access to information about
your checks -- such as
* You'll have better fraud protection.
Faster processing means
faster detection and faster
* If you detect a problem because of a
substitute check, Check 21
requires that the bank recredit your
account, pending an investi-
What items are subject to Check 21?
All checks, including cashier's checks,
payroll checks, personal
checks and business checks are subject to
Check 21. Savings bonds
are not checks and therefore are not
subject to Check 21.
How does Check 21 relate to electronic check
Check 21 involves creating digital images
of original checks, but
they are still processed under the same laws and
On the other hand, electronic check
conversion, or e-check, occurs
when a check is converted into an
electronic funds transfer. The
transaction is then routed through the
Automated Clearing House
(ACH) network, the same system used by Direct
your monthly statement, a substitute check will be
your other imaged checks; an e-check will
be listed with other
electronic funds transfers, such as
automated debits for example:
YMCA, cable, telephone, utility companies,
service, house or car payments, water and sewer,
you have questions or concerns, please contact a
at a location nearest you, or call
Bookkeeping at 308-632-7004 or
Toll Free at 888-632-7004.