Everything You Need to Know about Check 21 Act

by Elizabeth Murrow     If there is one important thing that electronic check users must know, that is the Check Clearing for the 21st Century Act. Check 21 Act is a law enacted on the 23rd of October, 2003 is a federal law that allows the receiver of a paper check to make a digital version. Because of this, there is no longer a need for further handling of the paper check. How does this affect the consumers? Although some checks are still returned, the effect of this law is that certain checks will no longer be returned together with their monthly statement. There is also a higher risk for checks to bounce because they are cleared faster and they will only end up having to pay for higher bank fees. The act has its own right although is still dependent on different factors. Check 21 creates what is known as a substitute check. This is a new kind of paper copy of an electronic image of a check. It is the only legal equivalent of the original check. Banks also save more money in this case but consumers will not benefit from it. For businesses, they can now legally scan a document via a computer to capture check images and deposit them electronically. However, electronically processed checks involve another set of rights. The Check 21 Act has been effective since October 28, 2004. It is intended to enhance the efficiency of the payment system, reducing the legal impediments of check truncation and to boost its development. Check truncation refers to the creation of a substitute check which allows banks to truncate or replace original checks and process them electronically. It also delivers checks to banks who still want to continue receiving paper checks. The 9/11 incident has influenced this act in a lot of ways. When the terrorist attacks happened, it became impossible for planes to travel and send checks through the clearing process. The banking industry suffered a lot from this because check processing was stopped. The Check 21 Act enabled electronic delivery of checks and the need for checks to be flown all over the country is eliminated. The implementation of this act is voluntary but most banks take advantage of this because of significant cost in savings. Despite the act's intent in cutting down costs and efficiently streamlining check processing by allowing the processing of electronic checks, consumers are experiencing a lot of effects, both positive and negative.   (Elizabeth Murrow currently works for a payment processing solution company. Being in the business for quite a long time now, she has been continuously sharing her knowledge through various lectures and blogging, including <a href="http://allaboutecheck.wordpress.com/">http://allaboutecheck.wordpress.com</a> and http://www.echeckprocessing.biz. Born and raised in California, Elizabeth now lives in Australia with her husband and two kids. She likes to travel during her free time.)

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