The Check Clearing for the 21st Century Act (or Check 21 Act) is a

United States federal law The law of the United States comprises many levels of codified and uncodified forms of law, of which the most important is the nation's Constitution, which prescribes the foundation of the federal government of the United States, as well as va ...

, , 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 the original paper

check Check or cheque, may refer to: Places * Check, Virginia Arts, entertainment, and media * ''Check'' (film), a 2021 Indian Telugu-language film * ''The Checks'' (episode), a 1996 TV episode of ''Seinfeld'' Games and sports * Check (chess), a thr ...

to create a digital version of the original check, 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. In essence, the recipient bank no longer returns the paper check, but effectively e-mails 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 A mobile phone, cellular phone, cell phone, cellphone, handphone, hand phone or pocket phone, sometimes shortened to simply mobile, cell, or just phone, is a portable telephone that can make and receive calls over a radio frequency link whil ...

to capture images of checks and deposit them electronically, a process known as

remote deposit Remote deposit or mobile deposit is the ability of a bank customer to deposit a cheque into a bank account from a remote location, without having to physically deliver the cheque to the bank. This was originally accomplished by scanning a digital ...

. Check 21 is not subject to ACH rules; therefore transactions are not subject to

NACHA Nacha manages the development, administration, and governance of the ACH Network, the backbone for the electronic movement of money and data in the United States, and is an association for the payments industry. The ACH Network serves as a netwo ...

(The Electronic Payments Association) rules, regulations, fees and fines.

Truncation

The Act lets banks take advantage of image technologies and electronic transport while not being dependent on other banks being ready to settle transactions with images instead of paper. The process of removing the paper check from its processing flow is called " check truncation". In truncation, both sides of the paper check are scanned to produce a digital image. If a paper document is still needed, these images are inserted into specially formatted documents containing a photo-reduced copy of the original checks called a " substitute check". Once a check is truncated, businesses and banks can work with either the digital image or a print reproduction of it. Images can be exchanged between member banks,

savings and loan Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions. This includes the core meaning as held in the originating Old English word , which is from an I ...

credit union A credit union, a type of financial institution similar to a commercial bank, is a member-owned nonprofit organization, nonprofit financial cooperative. Credit unions generally provide services to members similar to retail banks, including depo ...

s, servicers, clearinghouses, and the

Federal Reserve Bank A Federal Reserve Bank is a regional bank of the Federal Reserve System, the central banking system of the United States. There are twelve in total, one for each of the twelve Federal Reserve Districts that were created by the Federal Reserve A ...

Effects and developments

Remote deposit

Patents

There are a number of patents relating to "check back collection systems",Congressional Budget Office Cost Report
pages 2, 5 and 11 including some owned by

DataTreasury DataTreasury, located in Plano, Texas, United States, develops, acquires and licenses technology for secure check image capture and storage. As of 2010 the company had 2 employees, about 1000 shareholders and had generated over $350 million i ...

.Lisa Lerer
"Senate, old legal woes drawn into patent fight"
politico.com, March 25, 2008

References

{{reflist

External links

Full Text of the Check 21 Act
*
Accredited Standards Committee (ASC) X9 Financial Industry Standards: Statement on Check 21 adoption (October 23, 2004)
. ''Accredited Standards Committee X9''. Archived fro
the original
on December 24, 2008. *
Check 21 Return Codes
. '' Vericheck''. Archived fro
the original
on March 15, 2017. Federal Reserve System Negotiable instrument law United States federal banking legislation United States federal criminal legislation Acts of the 108th United States Congress Cheques