Substitute check

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Substitute Check

A digital image of the front and back of a check with the words "this is a legal copy of your check" appearing next to the image. A substitute check can be transferred electronically, while a regular check cannot. This can expedite the payment process of a check; that is, it reduces the amount of time it takes for the check to clear. Like regular checks, substitute checks can be used as proof that payment was made. Substitute checks are normally kept on file at the bank where they were deposited, but an account holder can usually receive a copy for a fee. A substitute check is also called an image replacement document.

Substitute check.

Substitute checks are digital copies of the fronts and backs of paper checks that provide the same legal protections and obligations as the originals, including serving as proof of payment.

Each check is formatted on a separate piece of paper a little larger than the original with the words "This is a legal copy of your check� appearing next to the image.

Using digital copies, which can be transmitted electronically, allows banks to process payments faster and more efficiently than they could when paper checks had to be routed through the check clearing system. Most banks destroy original checks once they've archived the substitutes, which means that you probably no longer receive cancelled checks with your bank statement.

Your bank may send you substitute checks but is more likely to provide either a line item statement or an image statement that has photocopies of the fronts and backs of cancelled checks grouped on a page. These are not substitute checks, although they can often be used as proof of payment.

If you need an actual copy of a substitute check, you can request it from your bank. However, there may be a fee.

References in periodicals archive ?
The IRS has indicated that it generally will accept photocopies of substitute checks as proof of payment.
March 8, 2011 /PRNewswire/ -- Liberty Processing Services Innovation (LPSI) today announced the launch of services to more efficiently print and distribute substitute checks for financial institutions.
By permitting the creation of substitute checks, Check 21 removed a key legal impediment to the replacement, during the collection process, of paper checks with electronic information ("check truncation").
The reports will display images of returned items, group out large-dollar notifications and provide a downloadable file for printing returned item substitute checks that credit unions can give to members," said Bill Brennan, director of site operations for the Dallas-based institution.
Check 21 facilitated electronic check processing by allowing banks to use electronic imaging technology for collection and create substitute checks from those images for delivery to banks that do not accept checks electronically.
Substitute checks are created by printing electronic images of the original paper checks.
That allowed banks to process check information electronically and deliver substitute checks to banks on which the paper checks were written.
By creating substitute checks, banks are able to remove the paper from the collection and return processes.
Substitute checks are the legal equivalent of the original checks.
Check 21 requires all drawee banks (19) to accept substitute checks from depository banks (20) in lieu of original checks.
Now that Check 21 has taken effect, a bank that takes in "electronic checks" by agreement will be able to present substitute checks, even to institutions that do not agree to accept "electronic checks.
It is expected that printing substitute checks will be less necessary and all banks will simply use electronic images to process payments in the near future.