A substitute check
is the legal equivalent of the original check and includes all the information contained on the original.
All customers (consumers and businesses) are affected by the Check 21 Act in that they have the potential to receive a substitute check
The law enables banks to use a new paper document--a "substitute check
"--that is the legal equivalent of the original check.
The proposed CTA would facilitate check truncation by creating a negotiable instrument called a substitute check
. Depository institutions would then be able to truncate original checks, deliver the check information electronically, and print and deliver these substitute checks
to institutions and their customers who want to continue receiving paper checks.
To facilitate check truncation and electronic check exchange, the Check 21 Act authorizes a new negotiable instrument called a substitute check
. A substitute check
is a paper reproduction of the original check that contains an image of the front and back of the original check and can be processed just like the original check.
In the U.S., one result of the September 11th event was that Congress, in 2003, passed legislation known as Check 21 (Check Clearing for the 21st Century Act) that permitted a printed copy of the digital image of a check (a "substitute check
") to have the same legal force as the original item.
With agreements between banks and their customers, except where the banks have agreed to provide canceled checks in their statements, the Check 21 Act permits the banks to provide either the original check or a "substitute check
" (defined below) "oc by agreement, information relating to the original check (including data taken from the MICR [magnetic ink character recognition] line of the original check or an electronic image of the original check), whether with or without subsequent delivery of the original paper check" (Check 21 Act, [section]3(18)).
(90) While banks were within their rights to use ECP before the Act, Check 21 permitted banks to present a "substitute check
," a paper copy of a digital version of the original paper check, to banks that did not accept digital copies.
Check 21 authorizes a new paper negotiable instrument called a "substitute check
," which contains a printed image of the front and back of an original paper check and is suitable for automated processing.
Signed into law in October 2003 and taking effect in October 2004, Check 21 allows a collecting bank to present a legally equivalent paper copy of an original check--called a "substitute check
"--if the paying bank requires a check to be presented for payment in paper form.
Because the image and a substitute check
may be in circulation simultaneously, this may increase the chances of a duplicate debit occurring.