Consumer FAQs on the
Check 21 Act
Check Clearing for the 21st Century Act
Q. Why was the Check 21 Act passed?
A- In order to allow more money transfers to be handled electronically
and to save the banks and federal government from having to deal with
the extra time and expense now spent in handling paper checks.
The basic idea of the act is that banks and merchants can use an entirely
electronic record of a check unless someone insists on a paper copy. When
someone requests a paper copy, the bank can give them a paper “substitute
check” rather than the original paper check.
Q- When does the Check 21 Act take effect?
A- October 28, 2004. However some banks and merchants may not immediately
start using electronic check images.
Q- How will the Check 21 Act affect me as a customer who writes a check
in payment to a merchant?
A. The electronic method of processing checks most likely will mean that
your check will reach your bank faster and be paid sooner than it currently
is. You should not write a check unless the cash is already in your checking
Q What does the Check 21 Act authorize banks and merchants to do?
A- Banks and merchants can form groups which exchange among themselves
only electronic records of checks instead of the original paper copies.
The original paper checks can be destroyed. There will be an image of
the check online and that electronic image will serve as proof if you
Q- What if a bank or merchant or customer wants something more than an
electronic record of a check?
A- That person or business can request a “substitute check;”
which is a specialized laser printout of the electronic image of the front
and back of the original check. A “substitute check” is required
to meet certain defined legal standards. It is not just a photocopy. (See
the very last Q&A below for details.)
Q- Under the “Check 21 Act,” will a bank be required to return
an original paper check to a consumer either with the monthly statement
or when there is a problem with a particular check?
A- No. The bank can send completely electronic information to the customer
if the customer agrees. However, if the customer requests a paper copy,
the bank will have to provide a “substitute check,” which
contains all the requirements of the Check 21 Act.
Q- Will a photo copy of a check be as good as a “substitute check?”
A- No! Only a specialized “substitute check” will be the
legal equivalent of the original paper check. This means the bank or merchant
has to guarantee the validity of the “substitute check.”
Also, only a “substitute check” will give the customer the
right to have disputed funds recredited to the account. If you ask for
a copy of your check, be sure to ask specifically for a “substitute
Q- What is the “recredit” right of a customer?
A- When a “substitute check” is provided to a customer and
there is a dispute, Check 21 gives the customer a right to have disputed
funds of up to $2,500 recredited to the customer’s account within
10 business days if the original check has been paid out twice or paid
for the wrong amount or otherwise paid in error. The customer has the
use of the funds until the bank’s investigation is complete.
Normally, under Check 21, a check will be processed electronically by
all the banks which it is routed through and the customer will not be
provided with a substitute check, in which case the check will remain
under state check law. In that case, the customer will not have a 10-day
right of recredit even if errors have occurred, such as when both the
paper check and the electronic check are paid from the account. The customer
will have to wait until the bank’s investigation is done before
getting a recredit to the account. Therefore, a consumer who wants to
have the most rights, should ask for the return of “substitute checks”
with his/her checking account statements.
Q- If my bank lets me see and print out the images of my checks over
the Internet, will the copy which I print out be considered a “substitute
A. Technically, no. Some courts might accept it as proof of payment while
other courts might not.
Q- If a customer requests a substitute check when there is a dispute
about a check which s/he wrote on a home equity line of credit or a credit
card, will the customer have this right to have the account recredited
within 10 days?
A- No. The Check 21 Act does not define home equity lines of credit or
credit card lines of credit as “consumer” accounts.
Q- Does a consumer have an absolute right to see the original paper check?
Q- What fee can the bank charge a customer who requests a substitute
A- The bank can decide the fee. Be sure to get a copy of your bank’s
rules for accounts.
Q- Can a bank require a customer to give up his/her right to receive
a substitute check and accept only electronic information?
Q- Can a customer or business or another bank refuse to accept the “substitute
check” as legal proof?
A- No! Everyone is required by law to accept the substitute check as
valid if it meets all the law’s requirements.
Q- What is a “voluntary truncation agreement?”
A- The consumer agrees that the bank can send him/her copies instead
of the original checks with each monthly statement.
Q- Are those copies considered “substitute checks?”
A- No. Those copies do not prove that a payment has been made and do
not trigger your Check 21 recredit right.
Q- What is a valid “substitute check” under the Check 21
A- The substitute check is a paper reproduction of the original check
(1) contain an image of the front and back of the original check;
(2) bear a MICR line containing all the information appearing on the
MICR line of the original check;
(3) conform, in paper stock, dimension, and otherwise, with “generally
applicable industry standards” for substitute checks; and
(4) be suitable for automated processing in the same manner as the original
A substitute check is the legal equivalent of the original check if it
(5) accurately represents all the information on the front and back
of the original check at the time the original was truncated and
(6) bears a legend that states “This is a legal copy of your check.
You can use it the same way you would use the original check.”