Check 21 Act

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Check Clearing for the 21st Century Act

Enacted by	the 108th United States Congress
Effective	October 28, 2004
Citations
Public law	Pub. L. 108–100 (text) (PDF)

The Check Clearing for the 21st Century Act (or Check 21 Act) is a United States federal law, Pub. L. 108–100 (text) (PDF), that was enacted on October 28, 2003 by the 108th U.S. Congress. The Check 21 Act took effect one year later on October 28, 2004. The law allows the recipient of a paper check to create a digital version of the original, a process known as check truncation, into an electronic format called a "substitute check", thereby eliminating the need for further handling of the physical document. The recipient bank no longer returns the paper check but electronically transmits an image of both sides of the check to the bank it is drawn upon.

Consumers are most likely to see the effects of this act when they notice that certain checks (or images thereof) are no longer being returned to them with their monthly statement, even though other checks are still being returned. Another effect of the law is that it is now legal for anyone to use a computer scanner or mobile phone to capture images of checks and deposit them electronically, a process known as remote deposit.

Check 21 is not subject to ACH rules; therefore transactions are not subject to NACHA (The Electronic Payments Association) rules, regulations, fees and fines.^[1]

This act was passed in response to the events of 9/11/2001, at that time checks were still physically transported between banks. In the weeks after 9/11 planes were grounded meaning checks were not transported in the timely manner people were used to. To prevent this breakdown of an at the time critical system of payment, this act was proposed and passed.