Check Clearing for the 21st Century Act (Check 21)
Frequently Asked Questions (FAQ)
Q: What is Check 21 and what is its basic purpose?
A: Check 21 is a federal law that is designed to enable Financial Institutions to handle more checks electronically, which should make check processing faster and more efficient. Today, Financial Institutions often must physically move original paper checks from the Financial Institution where the checks are deposited to the Financial Institution that pays them. This transportation can be inefficient and costly.
Q: When is Check 21 effective?
A: Check 21 becomes effective on October 28, 2004.
Q: How did Check 21 come about?
A: September 11th played a big part in the "Check Clearing for the 21st Century Act" because all of the Nations checks were grounded during that week. Billions of dollars were unable to be processed. The Federal government realized how dependent our Nation was on our transportation system and realized the Nations payment system needed to be more technologically advanced.
Q: How will Check 21 make check processing more efficient?
A: Instead of physically moving paper checks from one Financial Institution to another, Check 21 will allow Financial Institutions to process more checks electronically. Financial Institutions 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 Financial Institution or its customer requires a paper check, the Financial Institution can use the electronic picture and payment information to create a paper "substitute check." This process enables Financial Institutions to reduce the cost of physically handling and transporting original paper checks, which can be very expensive.
Q: How will it affect me as a consumer?
A: After October 28, 2004, you may receive a substitute check when you were expecting an original check. This might occur if an item that you deposited has been returned unpaid. Or if you request a copy of a check that paid from your account, the image you may receive could be a copy of a substitute check.
Q: Will my check be paid sooner because of Check 21?
A: With Check 21, Financial Institutions will likely process more checks electronically. As a result, your check may reach your Redwood Credit Union account faster and be paid sooner. Always make sure you have enough money in your account to cover the checks you write at the time that you write them.
Please keep in mind that Redwood Credit Union offers options for overdraft protection on your checking account. For more information, please call our Member Service Center at: (800) 479-7928.
Q: What is the difference between Check 21 and programs that convert checks to electronic payments?
A: A check you write may be processed as a physical check, as it has for many years. In some cases it may be converted to an image as Check 21 allows. In either scenario Check 21 allows the image of the check to act in place of the paper item. In this case, your rights are governed by check laws and regulations.
Under electronic check conversion, which is not check 21, the check is used only as a source of information to create an electronic fund transfer. No image is captured and transferred. The item is not processed as a check it is processed as an electronic payment.
These transactions are considered Automated Clearing House (ACH) transactions. An example of this is when you purchase an item from a merchant and write a check. The merchant scans the check and then hands the check back to you. The check has now been converted to an electronic ACH payment. Another example is when a company you have a bill with such as a utility or credit card converts your check to an ACH item. In both of these instances the checks have been converted to an electronic payment and are not considered checks. You must receive notice that your check may be processed as an electronic payment. Electronic fund transfers are governed by different laws and have different consumer rights than checks.
Q: What is a substitute check?
A:A substitute check is a paper copy of the front and back of the original check. 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.
Q: When is a substitute check legally the same as the original check?
A: A substitute check is legally the same as the original check if it accurately represents the information on the original check and includes the following statement: "This is a legal copy of your check. You can use it the same way you would use the original check." The substitute check must also have been handled by a Financial Institution.
Q: Can I use a substitute check as proof of payment?
A: Yes. 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 have a copy of an original check or a copy of a substitute check, you usually can use these documents as proof of payment.
Q: What should I do if something is wrong with the substitute check that I receive?
A: 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 it contains a bad picture of your original check, contact our Member Service Center at: (800) 479-7928.
Q: Can I get my original check if I need it?
A: Financial Institutions are not required currently to keep your original check for any specific length of time, and Check 21 does not add any new retention requirements. In many cases, the original check may be destroyed. If you request your original check from Redwood Credit Union we may provide you with the original check, a substitute check, or a copy of the check.
Q: Can I "OPT OUT" of Check 21 so that my checks are not converted to imaged items?
A: No, unfortunately you cannot "OPT OUT" of Check 21 since this is a federal law and all Financial Institutions are governed by it.
Q: What type of checks are allowed to be converted to images?
A: In general, any check can be imaged, including a personal check, corporate check, credit card check, postal money order, and U.S. Treasury check. However, a foreign check cannot be imaged.
Q: Does check 21 apply to Business Checks?
A: Yes. It applies to all types of checks referenced above.
Q: How am I protected under Check 21?
A: 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.
Q: If I suffer a loss related to a substitute check I received, can I file a claim with my Financial Institution?
A: Yes. If you have received a substitute check, you can file a special claim with Redwood Credit Union for a refund (called an "expedited recredit") if you believe that:
- The substitute check was incorrectly charged to your account,
- You lost money as a result of the substitute check being charged to your account, and
- You need the original check or a copy sufficient to show that the substitute check was incorrectly charged to your account.
Q: How do I make a claim under the Check 21 refund procedure?
A: If you believe that you have suffered a loss relating to a substitute check that you received, you should contact Redwood Credit Union as soon as possible but no later than 40 days from when we mailed or delivered your account statement. We will ask you to provide information we need to investigate your claim, which should include a description of the problem, an estimate of your loss, and information about the substitute check.
Q: How quickly must Redwood Credit Union handle my claim, and when will my account be refunded?
Our goal is to investigate your claim promptly. If we find that we incorrectly charged your account, we must refund the amount of your claim (up to the amount of the substitute check, plus interest, (if your account earns interest) within one business day of making that decision.
If we are unable to determine the validity of your claim within 10 business days after receiving it, we must refund the amount of your loss up to the lesser of amount of the substitute check or $2,500, plus interest (if your account earns interest). Unless we determine that your claim is not valid, we must refund to your account any remaining amount of your loss, up to the amount of the substitute check, plus interest, (if your account earns interest) no later than the 45th calendar day after we received your claim.
If your Redwood Credit Union later determines that your claim was not valid, we may reverse the refund and interest we have paid to you.
Q: How will I know if Redwood Credit Union has refunded my account?
A: If we refund your account, we will send you a notice by the next business day that tells you the amount of your refund and the date on which you may withdraw those funds. Normally, you may withdraw your refund on the business day after we refund your account.
Q: Can my Redwood Credit Union delay my ability to withdraw the amount that it refunds?
A: If we are still investigating your claim, we may delay your ability to withdraw up to the first $2,500 of the refund if (1) you are a new accountholder, (2) your account is repeatedly overdrawn, or (3) the we have reason to believe the claim is fraudulent. In these cases, we must allow you to withdraw the funds after determining that your claim is valid or on the 45th calendar day after the day that you submitted your claim, whichever occurs first.
Q: What happens if Redwood Credit Union says it charged my account correctly?
A: If we determine that we correctly charged your account, we will send you a notice by the next business day that explains the reason for that decision and will include either the original check or a copy of the original check that is sufficient to determine the validity of your claim. Redwood Credit Union will also either include the documentation that we used in making our determination or will explain to you that you can request such documentation.
