| How does this affect me? |
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| Check 21 will simplify paperwork, reduce fraud and increase security. On a day-to-day basis, one of the most important things for you to know is that it will allow checks to clear more quickly – which means that keeping close track of your account balance will become even more important. You won't have a few days to “float” checks before they reach your account. |
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| Why is the change being implemented? |
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| The goal of Check 21 is “to improve the overall efficiency of the nation’s payments system.” Over 40 billion checks are written annually and many of them must go through a long process of being transported from customer to retailer (or service provider) to one bank to another bank and back to the customer again. |
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| Transportation time and costs are not as efficient as utilizing the electronic transfer of check data and money. You may have already experienced two other emerging payment practices that have some similarities to how checks will be processed with Check 21. Each of the examples below uses the automated clearinghouse system (ACH). |
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On-Site Check Conversion
In the first example, a retailer converts a paper check into an electronic ACH payment on the spot. In this situation, if you've written a check for a purchase, you are handed the check back immediately after it's converted into an electronic ACH payment at the store. |
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Recurring-Bill Check Conversion
In the second example, regular billers (utilities, credit card providers, insurance companies, etc.) convert your check payments into ACH payments. The check has been “converted” to an electronic format, and you won't receive a copy of the original. The payment will be reflected in your bank statement, which becomes the legally accepted proof of your payment. |
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| Both of these examples are different from substitute checks, but help explain part of the process involved with Check 21.1 |
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| What exactly happens to my checks? |
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| Click here to see a flowchart illustrating how checks have been traditionally processed for many years and how the process will change with the implementation of Check 21. |
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| Here's a brief overview. |
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| Once you have written a check, your supplier (retailer, utility or other company) deposits it into its own bank. The bank then scans your check, creating an image which can be transmitted electronically to your bank, where the amount is immediately debited. |
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| If/when you receive your monthly statement from your own bank, you may receive substitute checks with it. These will be considered legal proof of the original check. |
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| Example of a substitute check - front view |
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| Example of a substitute check - back view |
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| How can a “substitute” check be considered a “real” check? |
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And how does that benefit me?
Here are the guidelines determined by the Check 21 legislation: |
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Substitute checks will bear the text: “This is a legal copy of your check. You can use it in the same way you would use the original check.” |
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Substitute checks will accurately represent all the information on the front and back of the original check. |
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Substitute checks are the legal equivalent of an original check for all purposes, including any provision of Federal or State law. |
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Consumers who believe a substitute check was not properly payable will be entitled to special expedited re-credit protections. |
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Banks must investigate any claim in most instances either resolve the consumer’s claim within 10 business days, or provide the consumer with a re-credit of up to $2,500 pending completion of the bank’s investigation. Final determination of any such investigation must be made within 45 days.2 |
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| What happens to my check? |
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| After your check is scanned and saved in an electronic retrieval system, it is destroyed by the bank who received it. You are protected by the same consumer protections that apply to your debit cards. |
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| Rest assured – although the check processing method is changing, you are still able to use actual checks to make purchases and payments. However, many people are finding they enjoy the convenience of using a debit card (also known as a check card), which Heritage Bank is happy to offer its customers. Contact us to learn more. |
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| 1 Source: American Bankers Association brochures. |
| 2 Source: America’s Community Bankers |
