You’ve written a check
for those new boots you couldn’t live without, hoping
that by the time it clears, you’ll have deposited the
money into your account to cover the purchase. Sound familiar?
Sure, many of us have been known
to “float” a check now and then, not really even
knowing that it’s not only risky, but actually illegal.
But now those days are over.
In today’s hi-tech world
where everything’s gone electronic, the Federal government
has decided to do the same. Actually, the events of September
11, and the grounding of all US planes, prompted the powers
that be to identify a faster way to clear checks without waiting
for the physical check itself to make the long journey from
the recipient all the way back to the issuing financial institution.
Since Oct. 28, thanks to Check
21, The Check Clearing for the 21st Century
Act, the time it takes to clear a check has been reduced
from days to hours. You simply cannot rely on “floating”
a check anymore. This new law helps financial institutions send
checks electronically to each other by “truncating”
the movement of paper checks by converting them to electronic
files.
Check 21 allows any financial
institution that doesn’t want to receive a check in electronic
form to request a paper copy of the electronic check. This converted
paper check is called a “substitute check.” A substitute
check is more than a photocopy or paper image of the original
check - it’s required to meet strict standards to qualify
as the legal equivalent of the original check.
Again, to make check processing faster,
federal law permits financial institutions to replace original
checks with these “substitute checks”. These checks
are similar in size to original checks with a slightly reduced
image of the front and back of the original check. The front
of a substitute check states: “This is a legal copy of
your check. You can use it the same way you would use the original
check.” You may use a substitute check as proof of payment
just like the original check.
For more information about
Check 21, visit this United States Government website
http://www.federalreserve.gov/pubs/check21/consumer_guide.htm
