Frequently Asked Questions
General
1. What is Check 21 and what is its basic purpose?
Check 21 is a federal law that is designed to enable banks to handle
more checks electronically, which should make check processing faster
and more efficient. Today, banks often must physically move original
paper checks from the bank where the checks are deposited to the
bank that pays them. This transportation can be inefficient and
costly. Check 21 became effective on October 28, 2004.
2. How will Check 21 make check processing more efficient?
Instead of physically moving paper checks from one bank to another,
Check 21 will allow banks to process more checks electronically.
Banks can capture a picture of the front and back of the check along
with the associated payment information and transmit this information
electronically. If a receiving bank or its customer requires a paper
check, the bank can use the electronic picture and payment information
to create a paper “substitute check.” This process enables
banks to reduce the cost of physically handling and transporting
original paper checks, which can be very expensive.
3. Is electronic check processing secure?
Electronic check processing is not new to the financial industry
and is a safe and reliable way of processing payments. It uses technology
that has been developed and tested to process your check information
securely.
4. Does Check 21 mean that customers can't get their checks
back in their account statements?
No. Check 21 does not require customers to stop receiving checks
back in their account statements. The contents of an account statement
will continue to be governed by the account agreement between the
bank and its customer. Rather, when banks have agreed to provide
paid checks in statements, Check 21 permits the bank to provide
either the original check or a substitute check.
5. What changes can I expect when Check 21 goes into effect?
If you are among the many customers of banks that do not receive
your canceled checks with your account statement, you likely will
not notice any change when Check 21 goes into effect on October
28, 2004. You will notice a change only if you receive a substitute
check when you were expecting an original check. For example, if
you receive canceled checks with your account statement, you might
begin to receive a mixture of canceled original and substitute checks.
If you receive image statements (pictures of several checks on a
single page), you also may notice that some of the pictures are
of substitute checks.
6. Will Check 21 increase the speed with which checks are
cleared between banks?
The speed of check-processing already has increased in response
to check-system improvements other than Check 21. Thus, even now,
once a check is deposited with a bank, it is almost always delivered
overnight to the paying bank and debited from the checkwriter's
account the next business day. Check-processing speeds should continue
to increase, over time, as banks make further operational changes
in response to Check 21. That means money may be deducted from your
checking account faster. Before you write a check, it's always best
to make sure your checking account has enough money in it to cover
the check.
7. Will Check 21 change how fast my bank must make my check
deposits available for withdrawal?
Another federal check law (the Expedited Funds Availability Act)
specifies the maximum times by which your bank must make funds available
to you, though most banks make funds available faster than required.
Check 21 did not change these maximum hold times. However, the Expedited
Funds Availability Act requires the Federal Reserve Board to reduce
maximum hold times in step with reductions in actual check-processing
times. Thus, over the longer term, if Check 21 sufficiently increases
the speed of check processing, the Board will reduce maximum hold
times.
A bank’s decision to place a hold on funds you deposit by
check does not affect the interest that you receive on the deposited
funds. Specifically, if you deposit a check into an interest bearing
checking account, your bank is generally required to begin to credit
interest to your account no later than the business day on which
the bank receives credit for the funds.
8. What is the difference between Check 21 and programs
that convert checks to electronic payments?
A check you write may be processed as a check. In that case, your
rights are governed by check laws and regulations. Some merchants,
however, may use your check as a source of information to create
an electronic fund transfer. You must receive notice that your check
may be processed this way. Electronic fund transfers are governed
by different laws and have different consumer rights than check
payments. For more information, see the brochure “When Is
Your Check Not a Check: Electronic Check Conversion” published
by the Federal Reserve Board.
Substitute Checks
9. What is a substitute check?
A substitute check is a paper copy of the front and back of the
original check. A substitute check is slightly larger than a standard
personal check so that it can contain a picture of your original
check. A substitute check must be printed in accordance with very
specific standards so that the substitute check can be used in the
same way as the original check. If you receive a substitute check
that appears to have a problem, such as it contains a bad picture
of your original check, contact your bank.
Front view of a substitute check
Back view of a substitute check
10. When is a substitute check legally the same as the
original check?
A substitute check is legally the same as the original check if
it accurately represents the information on the original check and
includes the following statement: “This is a legal copy of
your check. You can use it the same way you would use the original
check.” The substitute check must also have been handled by
a bank.
If you receive a substitute check that is not legally the same
as the original check and you suffer a loss related to the substitute
check, Check 21 provides you with a special procedure that you can
use to get your money back.
11. Can I use a substitute check as proof of payment?
Yes. You can use a substitute check as proof of payment because
it is legally the same as the original check. For instance, the
IRS will accept your substitute check as proof of payment. If you
do not have a substitute check but have a copy of an original check
or a copy of a substitute check, you usually can use these documents
as proof of payment.
12. How are image statements different from substitute
checks?
Instead of providing canceled checks, some banks provide customers
with image statements that show multiple pictures of canceled checks
per page. The pictures on the image statement could represent an
original check or a substitute check. Whether the consumer receives
an original check, a substitute check, an image statement, or a
line item on his or her account statement, check law protects consumers
against erroneous and unauthorized check payments. In addition,
Check 21 provides a special refund procedure (called “expedited
recredit”), if you receive a substitute check. For more information,
see the consumer protection section below or contact your bank.
13. Can I demand a substitute check from my bank instead
of a copy?
Your bank may provide you with a substitute check, but it is not
required by law to do so. If your bank does not provide you with
a substitute check, you usually can use a copy of an original check
or a copy of a substitute check as your proof of payment.
14. What should I do if something is wrong with the substitute
check that I receive?
A substitute check must show the front and back of the original
check and be printed in accordance with very specific standards.
If you receive a substitute check that appears to have a problem,
such as it contains a bad picture of your original check, contact
your bank. If you suffered a loss related to a substitute check
you received, see the consumer protection section below or contact
your bank.
15. Is my bank required to tell me about substitute checks?
Under Check 21, banks are required to provide a disclosure to their
consumer customers who receive canceled checks with their monthly
statements. The disclosure describes substitute checks and consumer
rights regarding substitute checks. Banks must provide this disclosure
to existing customers not later than the first statement mailing
after Check 21 becomes effective on October 28, 2004. After October
28, 2004, banks must provide this disclosure to new customers at
the time the customer relationship is established. If you receive
canceled checks with your account statement but did not receive
the required disclosure within the timeframes described above, please
request one from your bank.
Banks must also provide this disclosure when a consumer requests
an original check or copy of a check and receives a substitute check.
In addition, the bank must provide this disclosure if a check the
consumer has deposited is returned unpaid to the consumer in the
form of a substitute check.
Original Checks
16. Can I still get my canceled checks back?
If you get your canceled checks back with your account statements
today, you will continue to receive canceled checks unless your
bank notifies you otherwise. The only difference will be that some
of the canceled checks that you receive may be substitute checks.
You can use a substitute check the same way you would use an original
check, such as for recordkeeping and proof-of-payment purposes.
17. Can I get my original check if I need it?
Banks are not required currently to keep your original check for
any specific length of time, and Check 21 does not add any new retention
requirements. In many cases, the original check may be destroyed.
If you request your original check from your bank, your bank may
provide you with the original check, a substitute check, or a copy
of the check.
18. Can I prevent others from using my original check to
create a substitute check?
No. Generally, any check can be used to create a substitute check,
except a foreign check. Banks and their customers must accept a
substitute check as if it were the original check because the substitute
check is legally the same as the original check.
19. What if I receive a substitute check representing a
fraudulent original check?
Check law provides protections against fraudulent checks so that
generally you are not responsible if you notify the bank in a timely
fashion. This is the case whether you receive an original check,
a substitute check, an image statement, or a line item on your account
statement. If you receive a substitute check of a fraudulent original
check, you may have additional rights under Check 21. Contact your
bank for more information.
20. Do I need to use magnetic ink or toner when printing
checks?
To process checks, banks’ automated check sorting equipment
relies on numeric information that appears at the bottom of checks
and is printed in magnetic ink. This information is known as the
check’s magnetic ink character recognition line, or MICR line,
and contains information such as the routing number of the bank
on which the check is drawn, the account number on which the check
is drawn, and the check serial number. Generally applicable industry
standards for original checks long have required the MICR line to
be printed in magnetic ink; the need for magnetic ink on original
checks is not the result of the Check 21 Act. Only the MICR line
of a check must be printed in magnetic ink. The rest of the information
on the check, such as the date, the payee name, and the amount,
can be printed in regular, non-magnetic ink.
If you make payments by printing checks at home and the checks
you use have pre-printed MICR lines, then the rest of the information
that you print on the checks need not be in magnetic ink. By contrast,
if you must print a check’s MICR line because it is not preprinted
on the check, you should print the MICR line in magnetic ink.
Consumer Protection
21. How am I protected under Check 21?
Check law protects you against erroneous and unauthorized check
payments. In addition, Check 21 contains a number of new protections
for consumers. For example, Check 21 contains a special refund procedure
(called “expedited recredit”) for a consumer who suffers
a loss related to a substitute check he or she received.
22. What protections do I have if I receive image statements,
access pictures of my checks online, or receive an account statement
with descriptive information about my canceled checks?
Years ago, many banks stopped providing customers with canceled
checks and, as an alternative, began providing customers with documentation
showing which checks were paid. Regardless of the form of documentation
you receive, check law protects you against erroneous and unauthorized
check payments.
23. If I suffer a loss related to a substitute check I
received, can I file a claim with my bank?
Yes. If you have received a substitute check, you can file a special
claim with your bank for a refund (called an “expedited recredit”)
if you believe that
The substitute check was incorrectly charged to your account,
You lost money as a result of the substitute check being charged
to your account, and You need the original check or a copy sufficient
to show that the substitute check was incorrectly charged to your
account.
24. Does the special refund procedure apply if I receive
an image statement with a picture of a substitute check but do not
receive the actual substitute check?
No. The special refund procedure applies only if you actually received
a substitute check. However, check law protects you from improper
check charges regardless of whether you receive an original check,
substitute check, image statement, or a line item on your account
statement. If you feel an error was made to your account, contact
your bank immediately.
25. How do I make a claim under the Check 21 refund procedure?
If you believe that you have suffered a loss relating to a substitute
check that you received, you should contact your bank as soon as
possible but no later than 40 days from when your bank mailed or
delivered your account statement. Your bank will ask you to provide
information it needs to investigate your claim, which could include
a description of the problem, an estimate of your loss, and information
about the substitute check.
26. How quickly must my bank handle my claim, and when
will my account be refunded?
Your bank should investigate your claim promptly. If your bank
finds that it incorrectly charged your account, the bank must refund
the amount of your claim (up to the amount of the substitute check,
plus interest if your account earns interest) within one business
day of making that decision.
If your bank is unable to determine the validity of your claim
within 10 business days after receiving it, your bank on that day
must refund the amount of your loss up to the lesser of amount of
the substitute check or $2,500, plus interest (if your account earns
interest). Unless your bank determines that your claim is not valid,
it must refund to your account any remaining amount of your loss,
up to the amount of the substitute check, plus interest, no later
than the 45th calendar day after the bank received your claim.
If your bank later determines that your claim was not valid, it
may reverse the refund and interest it has paid to you.
27. How will I know if my bank has refunded my account?
If your bank refunds your account, it will send you a notice by
the next business day that tells you the amount of your refund and
the date on which you may withdraw those funds. Normally, you may
withdraw your refund on the business day after your bank refunds
your account.
28. Can my bank delay my ability to withdraw the amount
that it refunds?
If your bank is still investigating your claim, it may delay your
ability to withdraw up to the first $2,500 of the refund if (1)
you are a new accountholder, (2) your account is repeatedly overdrawn,
or (3) the bank has reason to believe the claim is fraudulent. In
these cases, your bank must allow you to withdraw the funds after
determining that your claim is valid or on the 45th calendar day
after the day that you submitted your claim, whichever occurs first.
29. What happens if my bank says it charged my account
correctly?
If your bank determines that it correctly charged your account,
it will send you a notice by the next business day that explains
the reason for that decision and will include either the original
check or a copy of the original check that is sufficient to determine
the validity of your claim. Your bank will also either include the
documentation the bank used in making its determination or will
explain that you can request such documentation.
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