The Check Clearing for the 21st Century Act (Check 21 Act) took effect in 2004 authorizing use of substitute checks. The intent of the Act is to make check processing more efficient and less costly by fostering the industry's ability to process checks electronically. The belief is that, because the first step in creating a substitute check is to create an electronic image of the original check, many institutions will begin processing checks electronically. This, in turn, will decrease processing time and transportation costs while reducing the likelihood of items being lost or destroyed in transit.
But, there are some common misconceptions regarding the impact this Act will have on the financial industry. And, as your account owners begin seeing images of substitute checks online or receiving returned substitute checks, chances are more questions will arise. It's in your best interest to educate consumers before that happens.
