CHECK 21
Keeping your check book balanced is very important. Years ago, you could write a check and be able to anticipate several days passing before the money was withdrawn from your account. This was called 'float'. Things are different nowadays. The Clearing for the 21st Century Act, or Check 21, took effect in October 2004 and has modernized the procedure of check processing.

How does Check 21 work?
Suppose you write a check to pay for your car loan. Your creditor can turn the paper image of the check into an electronic one, speeding it through its system. The creditor does not have mail your check to their bank, which then would mail it to its regional bank and then to your bank in order to receive your payment.

Not only does Check 21 save banks a great deal of money in processing and transportation costs, it helps circumvent occurrences when transportation grinds to a complete stop as a result of bad weather, or even worse, situations like 9/11.

Are there any potential problem for consumers and the Check 21 system?
Not all creditors utilize the Check 21 system. As a result, you will not know which checks were converted into electronic images until you get you statement. Therefore, relying on the couple of days 'float' offers is not a good idea.

If you like maintaining a balance in your account that covers the amount you write in checks, then you won't have to worry about float. However, many consumers are not as financially secure, living more close to the edge. This often results in checks bouncing.

What are substitute checks?
In the past, banks gave their customers the choice of receiving their canceled checks with their statements. Nowadays, it not required for banks to do this. In fact, customers can not demand the return of their cancelled checks. If you are involved in a dispute and need a copy of your original check to support payment, you will have to request a substitute check from your bank.  Substitute checks are new negotiable instruments implemented by the Check 21 law.

A substitute check means that your original check is made into a paper reproduction. It contains images of the front and back of your check and includes that statement "This is a copy of your original check. You can use it the same way you would use the original check." Substitute checks can be used as your verification of payment even in the court of law.

What does re-crediting my account mean?
If there is every a problem that can be tracked back to a substitute check, you are protected by the Check 21 law. This can be an incorrect charge as a result of an illegible amount from your original check on a substitute. Also, it common for your account to be double-debited. This means that the funds from your original check are deducted from your account and then deducted again as a result of the creation of the substitute check. Regardless of which situation pertains to you, you are entitled to an "expedited recredit."

The Check 21 law states that your bank must either prove that the charge is valid by producing a copy of the original check that correctly represents the check, or credit your account the full amount if the find your claim to be valid.

Exceptions will be made when there is fraud involved or if the account is new.

What about check-hold times?
One of the main disparagements of Check 21 is that checks you deposit do not clear any faster. Many consumers complain that as a result checks are bouncing and fees are being imposed because of non-sufficient funds.