Important Legislation Concerning Your Checking Account

Federal Reserve Regulation Concerning Check Clearing

In 2004, the Federal Reserve Board implemented a regulation called the “Check Clearing for the 21st Century Act” (Check 21). This regulation is intended to make the movement of checks through the Federal Reserve System more efficient. It permits financial institutions to truncate (not return) paper checks and create a new negotiable instrument called a “substitute check.” Substitute checks are legal equivalents of original checks and include all of the same information.

You will not see substitute checks very often. But you may see them, for example, if you request a copy of a check or if a check is returned to you unpaid. To qualify as a substitute check, the document must contain an image of the front and back of the original check; include the MICR line information as it appears on the bottom of the check; conform to industry standards for substitute checks; and be as suitable for automated processing as the original. You can use the substitute check in the same way that you would use the original check if it is an accurate representation of the original check and bears the statement, “This is a legal copy of your check. You can use it the same way you would use the original check.”

The most noticeable way that Check 21 affects you is that checks you write could clear sooner than before, increasing the risk that your checks will be returned if sufficient funds are not in your account when the checks are written. You are urged to always be sure appropriate funds are available in your account prior to writing checks.