Check Clearing for the 21st Century Act
You can no longer depend on "float" time
The Check Clearing for the 21st Century Act ("Check 21") was signed by President Bush on October 28, 2003 and became effective October 28, 2004. The goal of the legislation was to increase the efficiency of the nation's payment system by utilizing technology.
Roughly 40 billion checks were written in 2003. In part because the 'physical item' must be transported from the financial institution (FI) of first deposit to the paying FI often stopping at one, two or three other FIs along the way, there is a huge amount of time and money expended in the check clearing process. September 11 also made it clear how dependent the effectiveness of the process is on unimpeded transportation.
Check 21 allows for "essential information" (data and image) to be captured electronically from the original paper item. Essential information includes the routing and transit number, maker's account number, check number, dollar amount, endorsements, the front and back image of the item including all endorsements, etc. The electronic data, not the original paper item, is then sent through the clearing process. Another paper item, a 'Substitute Check', can then be created from the electronic check file if necessary anywhere throughout the process that an electronic check file isn't accepted or when a consumer needs a copy of the check. The Substitute Check literally replaces the original check written.
The law also recognized that the original item is no longer returned to the maker, nor is it available to be sent back to the payee in a returned item situation, and addressed this by requiring very specific conditions that must be met in order for an item to be considered a true Substitute Check. Then and only then is a Substitute Check the legal equivalent of the originally drawn paper item with all of the same rights and warranties. It must also conform to defined industry standards in paper stock, dimension, and other generally applicable parameters.
If you have questions about a particular item or to make a claim contact us at 508.263.6700 or 800.328.8797 Monday through Friday 8:00 a.m. to 8:00 p.m. or Saturday 9:00 a.m. to 3:00 p.m. Eastern time, or take a look in the Check 21 Q&A below.
IMPORTANT - You can no longer depend on the float
Checks processed electronically clear much faster - consequently consumers who in the past have relied on the ‘float’ (or the time between when you mail or pass the check and when the funds come out of your account) will need to make sure the funds are available when the check is written
- Substitute Checks exist only when the original has been converted
- It’s likely that larger dollar checks may be more commonly converted due to the faster clearing time and consequent faster assurance that the check is not going to be returned unpaid
- It's likely that larger national merchants and firms will go electronic before smaller ones
- Consumers are not losing any rights
Need the float? There are other options!
If you are concerned with writing checks under the Check 21 Act, here are some other great options:
- Now is the perfect time to sign up for DCU Bill Payer! With DCU Bill Payer, you have control over when your bills are paid.
- Write fewer checks by using your DCU Check Card. In addition by using your debit card, many merchants allow you to determine whether the funds are withdrawn from your account immediately (select debit) or continue to experience a short float period (select credit).
- Use your DCU Credit Card for purchases instead of writing checks.
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Digital Federal Credit Union 220 Donald Lynch Boulevard PO Box 9130 Marlborough, MA 01752-9130 508.263.6700 • 800.328.8797 |
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