Check 21 & Other E–Payments

Check 21

The check clearing for the 21st Century Act (Check 21) was signed into law on October 28, 2003, and became effective on October 28, 2004. Check 21 is designed to enhance the efficiency of the check payments system by creating a new negotiable instrument called a substitute check, which permits banks to truncate original checks, to process check information electronically, and to deliver substitute checks to banks that want to continue receiving paper checks. A substitute check is the legal equivalent of the original check and includes all the information contained on the original check.

A substitute check is a special paper copy of the front and back of an original check. The substitute check may be slightly larger than the original check. Substitute checks are specially formatted so they can be processed as if they were original checks. 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." The following sample shows what a substitute check looks like:

Substitute check back view Back of substitute check

Other E–Payments

There are two other new payment methods, each of which uses a type of check conversion.

In the first type, a retailer converts a paper check into an electronic automated clearinghouse (ACH) payment. Your check will be returned to you on the spot after the store has converted it into an electronic method.

In the second type, regular billers (utility companies, credit card providers, etc.) convert the check you’ve sent them into an ACH payment. Your original check is destroyed by the company and processed electronically.

Both of these methods allow for faster payment processing and better service.

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