Check 21
In October 2003, the Check Clearing for the 21st Century Act (Check 21) was passed into law and will become effective October 28, 2004. The goal of this act is to improve the overall efficiency of the nation's payment system. Since today's check processing environment involves extensive transportation costs and is time consuming, this law allows for the creation of a new negotiable instrument called a "substitute check" that will expedite the check collection process.
Following are frequently asked questions about Check 21 that will help you understand this new law and how it may affect you.
What is Check 21?
Check 21 is a new law that allows financial institutions to truncate (remove the original) checks anywhere in the check clearing process and replace that check with a new type of negotiable instrument called a substitute check. This allows financial institutions the opportunity to take advantage of electronic technology that enhances and expedites the clearing of checks.
What is a substitute check?
A substitute check is nothing more than a paper reproduction of your original check. The law describes the format in which this instrument must be created and gives your substitute check the same legal rights as if it were the original check. The substitute check will include an exact copy of your original check and will contain other pertinent information as dictated in the Check 21 law.
Why is Check 21 important?
Check 21 will provide savings by allowing financial institutions to take advantage of today's technology when collecting checks. Check 21 allows for faster collection and return of checks, which can help reduce check fraud. It will also provide you with greater control over your account and personal finances.
Will I notice a change immediately?
It is going to take time to change the way checks are processed. Most changes will occur over the next several years.
What changes might I see with regard to my credit union checking account?
Because your credit union has been truncating checks (not returning the original check in your statement) for the majority of members for many years, you will see minimal changes. However, you may begin to notice that your checks are clearing faster with little or no float. Therefore, after October 28, it will be dangerous for you to write checks in advance of payday. Be careful!
Will I ever see a substitute check?
There may be an occasion when you would see a substitute check on your account or in your statement. Remember that a substitute check is nothing more than a paper reproduction of your original check and is the legal equivalent of that check. An example of a time you may see a substitute check would be if you requested a copy of one of your cancelled checks (either through our branch network or through MemberConnect). You may also receive a substitute check if you deposit a check drawn on another financial institution into your credit union account that is later returned due to non-payment. The other institution may return the check as a substitute check.
Is there anything I need to do with regard to my LGFCU checking account?
No. Continuing to accurately maintain your checking account records and reconciling your statements in a timely manner is all that is necessary. As always, if you have questions visit your local branch office or contact the Call Center at 888.732.8562.
