The Check Clearing for the 21st Century Act (Check 21) became effective on October 28, 2004. The purpose of this act was to streamline the current process of negotiating paper checks and other instruments of value between financial institutions. The law actually creates a new negotiable instrument called a substitute check. This allows capture and processing of the information contained on the check electronically, and delivery of that substitute check to the receiving bank in an electronic format. For the consumer, this means that the substitute check is the legal equivalent of the original check and contains all of the information that was present on the original check.

However, the law does not require banks to accept checks in electronic form nor does it require banks to use the new authority granted by the act to create substitute checks. This means that your financial institution has the option as to how they will accept and clear checks deposited at their institution. The Federal Reserve Board has released the final rule to implement Check 21, including the model disclosure language for depository institutions to use in notifying consumers of their rights under the law. Intuition has worked to understand these rules and will be prepared to handle the requirements of the Act.

Despite a lot of media attention, most financial institutions will not be negotiating a large number of checks via the Check 21 processes immediately. Currently, most large financial institutions are able to receive or create the substitute check but many of the receiving institutions are not able to do so. At ISI we have worked closely with our technology partners to integrate both our hardware and software to implement Check 21 and are now able to deliver Check 21 files and images.

For more information, contact ISI today.

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