Academic journal article Federal Reserve Bulletin

Consumer Guides Published regarding Check 21 and Check-Processing Technology

Academic journal article Federal Reserve Bulletin

Consumer Guides Published regarding Check 21 and Check-Processing Technology

Article excerpt

The Federal Reserve Board on October 28, 2004, announced the publication of two new consumer guides that provide practical information on the changes resulting from technological advances in check processing.

Technological innovation is allowing for checks to be collected and processed more efficiently, reducing the time and resources dedicated to handling, sorting, and transporting checks. A federal law known as the Check Clearing for the 21st Century Act (Check 21), which became effective on October 28, makes it easier for banks to electronically transfer check images instead of physically transferring paper checks. Check 21 does not require banks to accept checks electronically, but it facilitates electronic transmission between banks by providing a way for banks that clear checks electronically to exchange information with those that do not.

Under Check 21, banks would be able to stop the flow of paper checks, process them electronically, and create machine-readable substitute checks--paper copies of the front and back of original checks--when a paper check is needed. Check 21 requires banks and consumers to accept substitute checks in place of original checks in the check-collection or return process. It does not require that bank customers stop receiving paid checks in their account statements, although these checks may be either the originals or in the form of substitute checks.

The Consumer Guide to Check 21 and Substitute Checks describes ways that consumers may be affected by the new law and provides information on ways to resolve problems associated with the receipt of substitute checks. …

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