Check 21

Check 21 refers to the Check Clearing for the 21st Century Act, a federal law enacted in the United States in 2004 to modernize the check processing system. This law permits banks to handle more check processing electronically by using digital images of checks, known as substitute checks, instead of the original paper versions.

The key component of Check 21 is that it allows the creation and use of a substitute check—a digital reproduction of the original paper check that is considered the legal equivalent of the original for all purposes. This digital check can be processed just like the paper check but can be transmitted electronically between banks, significantly speeding up the clearing process.

The benefits of Check 21 include faster processing and clearing times for checks, reduced transportation costs, and increased efficiency in the banking system. It also reduces the risk of checks being lost or stolen during physical transport. For consumers and businesses, this means quicker access to funds and more rapid confirmation of payment.

However, despite the move towards electronic processing facilitated by Check 21, banks are still required to accept and process original paper checks. The act does not mandate that all checks must be processed electronically but rather provides the framework and legal recognition for electronic processing to occur alongside traditional methods.