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WHAT IS CHECK 21 INTENDED
TO DO?
The Check Clearing for the 21st Century
Act (Check 21) became effective in the USA on 28th October
2004. Banks no longer have to physically exchange original
checks in order to settle accounts.
This means that:
- Images can be used as a legal representation of the
original check
- There is no requirement to physically ship the original
checks around the country for settlement
- The clearing cycle will be shortened and as a result
the opportunity for fraud reduced
Check 21 makes the substitute check
the legal equivalent of the original item.
The Check 21 legislation authorises the
use of a substitute check or Image Replacement Document,
so long as:
The substitute check:
- Bears the words: “This is a legal copy of your
check. You can use it the same way you would use the
original check"
- Contains an image of both the front and the back
of the check
- Has an MICR line with the information contained on
the original check
- Meets industry standards for physical characteristics
such as quality of paper stock, size etc.
- Is able to be processed automatically in the same
manner as the original check
WHAT CHECK 21
DOES NOT DO
- The Check 21 legislation does not require banks to
provide or accept images – they can continue to
process paper checks as at present
- Check 21 does not force any regulations or controls
on participating banks - it is down to individual institutions
to develop bi-lateral agreements to facilitate information
exchange
BENEFITS OF CHECK 21
- Reduction in “Float” – when imaged
checks can be presented almost instantaneously, reducing
delays in processing caused by the necessity to physically
move paper checks around
- Reduction in transportation costs – the costs
of transmitting images is small compared to the cost
of physically collecting and shipping checks –
and less prone to disruption
- Reduced processing costs – images can be processed
and sorted faster and without the need for large investment
in hardware. Image cash letters will reduce processing
costs and branch capture becomes a practical option.
- Improved customer service – check images can
be searched far quicker to resolve customer queries
and disputes
- Development of new added value products – check
images and statements can be delivered to customers
in new ways, via the web, e-mail or on CD/DVD
WHAT TO DO NEXT?
Contact us for
a detailed discussion on how Check 21 affects your business,
and how you can make the most of the opportunities it presents.
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