The Disappearing Check and Check 21 Law

What happened to your cancelled checks? As of October 28, 2004, there were major changes concerning the banking laws and your bank account.

November 28, 2004 -- Check 21 is a new federal law that authorizes changes to the way banks process paper checks. Check 21 allows banks to process and deliver checks electronically and to print special copies or electronic reproductions of checks instead of transporting or holding onto original paper checks.

This special copy or electronic reproduction is called an image replacement document (IRD) or a substitute check. All checks, including personal checks, business checks, payroll checks and cashiers checks, are subject to Check 21. The substitute check is considered the legal equivalent of the original check and should contain an image of the front and back of the original check, your account number and bank routing number (also known as MICR) and the statement This is a legal copy of your check. You can use it the same way you would use the original check. Only a substitute check issued by the bank is legally equivalent to the original check to prove payment; photocopies or other images are not considered valid.

WHAT YOU NEED TO KNOW
Checks may be processed more quickly. Delays known as float time could be reduced, so a check that you write could clear in hours instead of days. You may be more likely to bounce checks and possibly incur significant fees unless you adjust your check writing habits as recommended below.
Due to faster processing, it may be more difficult to stop a check that has been written from being paid.
You should be aware that transferring a check back and forth between paper and electronic formats could create a risk that the amount on the check might be changed, due to human or computer error, when it is processed. Be sure to keep and check your records carefully.
You probably won't be able to get your original paper checks back. Your bank is not required to keep your original check for any period of time as long as they are able to provide a substitute copy of the check for seven years. (Before Check 21, banks were required to keep original checks for six years if they didnt return them to the consumer.)
It may be more difficult to prove that a check has been forged or altered without the original check. Keep careful records.
For consumers with accounts that require the return of paper checks (9-m), the bank is permitted to provide an image of the check in lieu of returning the original.
Banks are not obligated to make funds available to your account any sooner than in the past. This means that it may still take 3 to 5 business days, or longer, for a check written to you to clear and the funds that check represents to become available. This is designed to prevent fraud.
It also could mean that you may not be able to make withdrawals of that money and that you should not write checks on that money until you are certain that your bank has made the funds available for use.

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