Check 21

What is Check 21?
Check 21, a federal law that becomes effective on October 28, 2004, enables banks to handle checks electronically, which will make check processing faster and more efficient. Currently, banks physically move millions of paper checks from the bank where the checks are deposited to the bank that pays them. This transportation is inefficient and cumbersome. By converting checks to digital form and moving them electronically, the process is greatly improved.

How will Check 21 make check processing more efficient?
Instead of physically moving paper checks from one bank to another, Check 21 will allow banks to process checks electronically. Banks can capture a picture of the front and back of the check, along with the associated payment information, and transmit this information electronically. If a receiving bank or its customer requires a paper check, the bank can use the electronic picture and payment information to create a paper “substitute check” which is legal for any use provided by the original paper check.

Is electronic check processing secure?
Electronic check processing is not new to the financial industry, although Check 21 will greatly expand its usage. It uses technology that has been developed and tested to process your check information securely.

Will Check 21 increase the speed with which checks are cleared between banks?
The speed of check-processing already has increased in response to check-system improvements other than Check 21. Even now, once a check is deposited with a bank, it is almost always delivered overnight to the paying bank and debited from the check writer's account the next business day. Check-processing speeds should continue to increase over time as banks make further operational changes in response to Check 21. That means money may be deducted from your checking account faster. Before you write a check, it's always best to make sure your checking account has enough money in it to cover the check.

What is a substitute check?
A substitute check is a paper copy of the front and back of the original check. It may be referred to as an “IRD”, Image Reduced Document. A substitute check is slightly larger than a standard personal check so that it can contain a picture of your original check. A substitute check must be printed in accordance with very specific standards so that the substitute check can be used in the same way as the original check. If you receive a substitute check that appears to have a problem, such as a bad picture of your original check, contact Kleberg Bank.

Can I use a substitute check as proof of payment?
Yes. The law provides that you can use a substitute check as proof of payment because it is legally the same as the original check. For instance, the IRS will accept your substitute check as proof of payment. If you do not have a substitute check, but a copy of an original check or a even a copy of a substitute check, you can use these documents as proof of payment.

What should I do if something is wrong with the substitute check that I receive?
A substitute check must show the front and back of the original check and be printed in accordance with very specific standards. If you receive a substitute check that appears to have a problem, such as a bad picture of your original check, contact your bank. If you suffered a loss related to a substitute check you received, see the consumer protection section below or contact Kleberg Bank.

How am I protected under Check 21?
Current check law protects you against erroneous and unauthorized check payments. In addition, Check 21 contains a number of new protections for consumers. For example, Check 21 contains a special refund procedure (called “expedited recredit”) for a consumer who suffers a loss related to a substitute check he or she received.

If I suffer a loss related to a substitute check I received, can I file a claim with my bank?
Yes. If you have received a substitute check, you can file a special claim with us for a refund. Our personnel will gladly help you with the claim process.

For more information go to: Writing a Check: Understanding Your Rights