What is Check 21?

Check 21 is a new law that allows financial institutions to truncate checks earlier in the check clearing process. It also allows all banks and credit unions to start the process of substituting physical paper checks with electronic check images at any point during the check collection process.


What is truncation?

Truncation means to remove an original paper checks from the check process, and in its place make a substitute electronic check. In other words, truncation means you do not receive the actual canceled check back with your monthly statements.


Why is Check 21 important?

Check 21 will provide savings by allowing financial institutions to substitute paper checks with an electronic equivalent sooner or more often during the clearing process. Additional costs savings are realized because financial institutions can eliminate the handling, manual processing and storage of paper checks. Furthermore, 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.


What is "electronic equivalent" and how does it happen?

An electronic check equivalent is actually an electronic substitution of your original check. This is generated during the processing of your check thus allowing electronic transmission and delivery.


How will Check 21 change things?

Check 21 clearly brings change to the check clearing process by affording financial institutions a less costly method of processing. The old system wasted money, burned fuel, and clogged our transportation systems. Check 21 reduces the dependence of the check clearing system on physical transportation networks. Unexpected interruptions (e.g., natural disaster, etc.) will be better avoided because it does not rely on physical transportation of checks.


When is Check 21 going to be in effect?

President Bush signed the Check 21 Act into law on October 28, 2003, with an implementation date of October 28, 2004. This timeframe provides U.S. financial institutions with the time necessary to comply without burdening them with associated costs all at once.


How fast will change take place?

Any noticeable change in the way checks are processed is going to take some time. Changes will happen slowly, as financial institutions need time to purchase equipment and otherwise "gear up" for a fully electronic check exchange environment.


Why are credit unions going to be better off than banks?

Credit unions have been truncating checks for nearly three decades--since we were first allowed to offer checking account in the mid-1970's. Banks, in general, do not truncate checks. They are laden with huge numbers of checks to return with procedures and machinery that may not be as readily adaptable to Check 21's image exchange availability as credit unions.


What changes might I see with regard to my credit union checking account because of Check 21?

Because credit unions have been truncating checks for several decades, you will see minimal changes. One change you may notice, however, is that if you request a copy of one of your cleared checks, you may actually receive a Image Replacement Document, or IRD (an electronic check equivalent), which will carry all the information of your original check. Also, you will have to keep in mind that there will be virtually no float time involved when writing a check at HEB for example, meaning as in the past you could write the check knowing it wouldn't clear for a few days which was known as (float time). Under Check 21 checks will clear in a matter of hour rather than days.


So, will I still be able to get a copy of a canceled check if I need one?

Yes. However, as mentioned, the canceled check may actually be an electronic check substitute of your written check.


Will this substitute copy be "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 canceled paper check.


What are recredit rights and do I have them?

Yes, you have recredit rights. If you believe that a substitute check was not properly charged to your account, recredit rights allow you to pursue a correction.


Is there anything I should do differently with regard to my credit union checking account?

Accurately maintain your checking account records, and reconcile your statements timely, as you have done in the past. As always, if you have any questions about your account, please call or stop in to see us--we would be happy to assist you.