What is Check 21?

Wauna Federal Credit Union presents:
“CHECK CLEARING FOR THE 21ST CENTURY ACT” - CHECK 21

What is Check 21?
Triggered by the events of September 11, 2001, Congress enacted into law “Check 21” to make check processing and payments more efficient. Each year, billions of checks are written and the journey each check takes is long; beginning at the point of sale, then cashed or deposited at financial institutions, processed by depository banks, sent to paying banks, and finally returned to payers. This transporting of checks takes time and costs money.

On October 28, 2003 President Bush signed Check 21 into law.

What changes will Check 21 have on my checking account?
Since checks have been truncated by the credit unions for several decades, there will only be minor noticeable changes. One change that will be visible is if you request an original copy of one of your cleared share drafts, you may actually receive a substitute check (a paper reproduction of your original check that will carry all the information of your original check). You could also receive an unpaid check returned to you in the form of a substitute check.

What is a substitute check?
To make check processing faster, federal law permits banks to replace original checks with “substitute checks.” These checks are similar in size to original checks with a slightly reduced image of the front and back of the original check. The front of the substitute check states: “This is a legal copy of your check. You can use it the same way you would use the original check.” You may use a substitute check as proof of payment just like the original check. Some or all of the checks that you receive back from us may be substitute checks. This notice describes rights you have when you receive substitute checks from us. The rights in this notice do not apply to original checks or to electronic debits to your account. However, you have rights under other laws with respect to those transactions.

Click here for an example of a substitute check

Click here for Frequently Asked Questions from the Federal Reserve

Substitute checks, hmmm, are they legal?
Yes. A substitute check is the legal equivalent of its original check for all purposes, if it meets all specified requirements. This substitute check can be used in the same legal manner as if it was your original paper check.

Can I obtain a copy of a cancelled check?
Yes. The cancelled check may actually be a substitute check, a paper reproduction of the original check.

Do I get special rights with Check 21?
There are recredit rights available, which means if you believe a substitute check was not properly charged to your account, the right allows for you to pursue a correction.

How do I make a claim for a refund?
If you believe you have suffered a loss relating to a substitute check you receive and was posted to your account, please contact us.

You must contact us within 40 calendar days of the date we mailed (or otherwise delivered by a means to which you agree) the substitute check in question, or the account statement showing that the substitute check was posted to your account, whichever is later. We will extend this time period if you were not able to make a timely claim because of extraordinary circumstances.
Your claim must include:

- A description of why you have suffered a loss (for example, you think the amount withdrawn was incorrect);
- An estimate of the amount of your loss;
- An explanation of why the substitute check you received is insufficient to confirm that you suffered a loss; and,
- A copy of the substitute check [and/or] the following information to help us identify the substitute check: identifying information, for example the check number; the name of the person to whom you wrote the check; the amount of the check.

What are my rights regarding substitute checks?
In certain cases, Federal law provides a special procedure that allows you to request a refund for losses you suffer if a substitute check is posted to your account (for example, if you think that we withdrew the wrong amount from your account or that we withdrew money from your account more than once for the same check). The losses you may attempt to recover under this procedure may include the amount that was withdrawn from your account, and fees that were charged as a result of the withdrawal (for example, return check fees).

The amount of your refund under this procedure is limited to the amount of your loss, or the amount of the substitute check, whichever is less. You also are entitled to interest on the amount of your refund if your account is an interest-bearing account. If your loss exceeds the amount of the substitute check, you may be able to recover additional amounts under other law.

If you use this procedure, you may receive up to the lesser of the amount of the substitute check or $2,500 of your refund (plus interest if your account earns interest) no later than the end of 45 calendar days after the banking day on which the credit union received the claim.

We may reverse the refund (including any interest on the refund) if we later are able to demonstrate that the substitute check was correctly posted to your account.

Why is Check 21 Important?
Check 21 will provide savings by allowing financial institutions to substitute paper checks with a paper reproduction sooner and more often during the check clearing process. Additionally, Check 21 will encourage financial institutions to enter into image exchange agreements, eliminating the need to exchange paper items completely. Cost savings may be realized because financial institutions can eliminate the handling, manual processing and storage of paper checks. In addition, Check 21 allows for faster collection and return of checks, which can help mitigate check fraud. It also reduces check clearing time, which provides you with greater control over your account and personal finances.