Check Clearing for the 21st Century Act
Important information you need to know about this legislation.
The Check Clearing for the 21st Century Act - commonly known as Check 21 - was signed into law on October 28, 2003 and is effective October 28, 2004. The following "Q & A" was designed to help you understand what Check 21 means to you.
Q. What exactly is Check 21?
A. Check 21 is a new law that allows credit unions, banks and processors to "truncate" checks earlier in the check clearing process and more often. It also allows all U.S. financial institutions to start the process of substituting paper checks with electronic checks at any point during the check collection process.
Q. What is truncation?
A. Truncation means to remove an original paper check from the check process, and in its place make a substitute electronic check. In other words, truncation means you do not receive the actual canceled check back with your monthly statements, as you are already used to with your Suncoast checking account.
Q. Why is Check 21 important?
A. Check 21 will provide savings by allowing financial institutions to substitute paper checks with an electronic equivalent sooner and more often during the check clearing process. Additional cost savings are realized because financial institutions can eliminate the handling, manual processing and storage of paper checks. In addition, Check 21 allows for faster collection and return of checks, which can help mitigate check fraud. It also reduces check clearing time, which provides you with greater control over your account and personal finances.
Q. What is an "electronic equivalent" of a check and how does it happen?
A. An electronic check equivalent is actually an electronic substitution of your original check. This equivalent is generated during the processing of your check thus allowing electronic transmission and delivery.
Q. How will Check 21 change things?
A. Check 21 clearly brings change to the nation's check clearing system. The new law offers all U.S. financial institutions the opportunity to select the least costly processing method. The old system wasted money, burned fuel, and clogged our transportation systems. Check 21 reduces the dependence of the check clearing system on physical transportation networks. Unexpected interruptions (e.g., natural disasters, etc.) will be better avoided because it does not rely on the physical transportation of checks.
Q. When is Check 21 going to be effective?
A. President Bush signed Check 21 into law on October 28, 2003, with an implementation date of October 28, 2004. This timeframe provides U.S. financial institutions with the time necessary to comply without burdening them with associated costs all at once.
Q. Why are credit unions, in general, seemingly better off than some banks with regard to implementing Check 21?
A. Suncoast, like many credit unions, has been truncating checks for nearly three decades - since we were first allowed to offer checking accounts in the mid-1970s. Banks, in general, do not truncate checks. They are laden with huge numbers of checks to return with procedures and machinery that may not be as readily adaptable to Check 21's image exchange availability as credit unions.
Q. What changes might I see with regard to my Suncoast checking account because of Check 21?
A. Because Suncoast already truncates checks, you will see minimal changes. One change you may notice, however, is if a check you deposited is returned, unpaid, by the "paying" bank. In this case, you may receive an Image Replacement Document, also known as an IRD or substitute check, which will carry all the information of the original check.
Q. Will this substitute copy be "legal?"
A. Yes. A substitute check is the legal equivalent of its original check for all purposes, if it meets all specified requirements. This substitute check can be used in the same legal manner as if it was your original cancelled paper check.
Q. So, will I still be able to get a copy of a cancelled check if I need one?
A. Yes. The credit union will be able to provide a copy of a cleared item as we do now.
Q. What are recredit rights? Do I still have them?
A. Yes. You have re-credit rights. If you believe that a substitute check was not properly charged to your account, re-credit rights allow you to pursue a correction.
Q. Is there anything I should do differently with regard to my Suncoast checking account?
A. No. Accurately maintain your checking account records, and reconcile your statements timely, as you have in the past. As always, if you have any questions about your accounts, please email us via Sunnet, call, or stop in to see us.
IMPORTANT CONSUMER AWARENESS INFORMATION AND DISCLOSURES:
A SUBSTITUTE CHECK IS THE LEGAL EQUIVALENT OF AN ORIGINAL CHECK FOR ALL PURPOSES, INCLUDING ANY PROVISIONS OF ANY FEDERAL OR STATE LAW, AND FOR ALL PERSONS, IF THE SUBSTITUTE CHECK:
A. ACCURATELY REPRESENTS ALL OF THE INFORMATION ON THE FRONT AND BACK OF THE ORIGINAL CEHCK AS OF THE TIME AT WHICH THE ORIGINAL CHECK WAS TRUNCATED; AND
B. BEARS THE LEGEND: "THIS IS A LEGAL COPY OF YOUR CHECK. YOU CAN USE IT IN THE SAME WAY YOU WOULD USE THE ORIGINAL CHECK."; AND
C. THE CONSUMER RECREDIT RIGHTS ESTABLISHED BY CHECK 21 APPLY WHEN A CONSUMER BELIEVES IN GOOD FAITH THAT A SUBSTITUTE CHECK WAS NOT PROPERLY CHARGED TO THE ACCOUNT OF THE CONSUMER. SUCH RIGHTS ARE SET FORTH BELOW:
- IN GENERAL: A consumer may make a claim for expedited recredit from the financial institution that holds the account of the consumer with respect to a substitute check, if the consumer asserts in good faith that: (A) the financial institution charged the consumer's account for a substitute check that was provided to the consumer; (B) either the check was not properly charged to the consumer's account or the consumer has a warranty claim with respect to such substitute check; (C) the consumer suffered a resulting loss; and (D) the production of the original check or a better copy of the original check is necessary to determine the validity of any claim described in subparagraph (B).
- 40-DAY PERIOD: Any claim with respect to a consumer account may be submitted by a consumer before the end of the 40-day period beginning on the later of the date on which the financial institution mails or delivers, by a means agreed to by the consumer, the periodic statement of account for such account which contains information concerning the transaction giving rise to the claim or the date on which the substitute check is made available to the consumer.
- PROCEDURES FOR CLAIMS: To make a claim for an expedited recredit with respect to a substitute check, the consumer shall provide to the financial institution that holds the account of such consumer: (A) a description of the claim, including an explanation of (i) why the substitute check was not properly charged to the consumer's account; or (ii) the warranty claim with respect to such check; (B) a statement that the consumer suffered a loss and an estimate of the amount of the loss; (C) the reason why production of the original check or a better copy of the original check is necessary to determine the validity of the charge to the consumer's account or the warranty claim; and (D) sufficient information to identify the substitute check and to investigate the claim. The financial institution can require that the claim be submitted in writing and the financial institution can permit the consumer to submit the claim electronically if the consumer has agreed to communicate with the financial institution in that manner.
- RECREDIT TO CONSUMER:
CONDITIONS FOR RECREDIT: The financial institution shall recredit a consumer account for the amount of a substitute check that was charged against the consumer account if (A) a consumer submits a claim to the financial institution with respect to that substitute check that meets the "PROCEDURES FOR CLAIMS" listed above and (B) the financial institution has not (i) provided to the consumer the original check or a copy of the original check (including an image or a substitute check) that accurately represents all of the information on the front and back of the original check, as of the time at which the original check was truncated; and (ii) demonstrated to the consumer that the substitute check was properly charged to the consumer account. Claims must be submitted in writing to: Suncoast Schools Federal Credit Union, Records Department, ATTN: Check 21, PO Box 11904, Tampa, FL 33680; or sent by FAX to (813) 740-2005 or via SunNet email.
TIMING OF RECREDIT: In general, the financial institution shall recredit the consumer's account for the amount described under "CONDITIONS FOR RECREDIT" above no later than the end of the business day following the business day on which the financial institution determines the consumer's claim is valid.
RECREDIT PENDING INVESTIGATION. If the financial institution has not yet determined that the consumer's claim is valid before the end of the 10th business day after the business day on which the consumer submitted the claim, the financial institution shall recredit the consumer's account for (i) the lesser of the amount of the substitute check that was charged against the consumer account, or $2,500, together with interest if the account is an interest-bearing account, no later than the end of such 10th business day; and (ii) the remaining amount of the substitute check that was charged against the consumer account, if any, together with interest if the account is an interest-bearing account, not later than the 45th calendar day following the business day on which the consumer submits the claim.
- AVAILABILITY OF RECREDIT:
NEXT DAY AVAILABILITY. Except as provided in "SAFEGUARD EXCEPTIONS" below, a financial institution that provides a recredit to a consumer account shall make the recredited funds available for withdrawal by the consumer by the start of the next business day after the business day on which the financial institution recredits the consumer's account.
SAFEGUARD EXCEPTIONS. A financial institution may delay availability to a consumer of a recredit provided under "RECREDIT PENDING INVESTIGATIONS: above until the start of either the business day following the business day on which the financial institution determines that the consumer's claim is valid or the 45th calendar day following the business day on which the consumer submits a claim for such recredit, whichever is earlier, in any of the following circumstances:
NEW ACCOUNTS. The claim is made during the 30-day period beginning on the business day the consumer account was established.
REPEATED OVERDRAFTS. Without regard to the charge that is the subject of the claim for which the recredit was made (i) on 6 or more business days during the 6-month period ending on the date on which the consumer submits the claim, the balance in the consumer account was negative or would have become negative if checks or other charges to the account had been paid; or (ii) on 2 or more business days during such 6-month period, the balance in the consumer account was negative or would have become negative in the amount of $5,000 or more if checks or other charges to the account had been paid.
PREVENTION OF FRAUD LOSSES. The financial institution has reasonable cause to believe that the claim is fraudulent, based on facts (other than the fact that the check in question or the consumer is of a particular class) that would cause a well grounded belief in the mind of a reasonable person that the claim is fraudulent.
OVERDRAFT FEES. No financial institution that delays the availability of a recredit under "SAFEGUARD EXCEPTIONS" above to any consumer account may impose any overdraft fees with respect to drafts drawn by the consumer on such recredited amount before the end of the 5-day period beginning on the date notice of the delay in the availability of such amount is sent by the financial institution to the consumer.
- REVERSAL OF RECREDIT: A financial institution may reverse a recredit to a consumer account if the financial institution (1) determines that a substitute check for which the financial institution recredited a consumer account was in fact properly charged to the consumer account; and (2) notifies the consumer in accordance with "NOTICE TO CONSUMER" provisions below.
- NOTICE TO CONSUMER:
NOTICE IF CONSUMER CLAIM NOT VALID. If a financial institution determines that a substitute check subject to the consumer's claim was in fact properly charged to the consumer's account, the financial institution shall send to the consumer, no later than the business day following the business day on which the financial institution makes a determination (A) the original check or a copy of the original check (including an image or a substitute check) that (i) accurately represents all of the information on the front and back of the original check (as of the time the original check was truncated); or (ii) is otherwise sufficient to determine whether or not the consumer's claim is valid; and (B) an explanation of the basis for the determination by the financial institution that the substitute check was properly charged, including a statement that the consumer may request copies of any information or documents on which the financial institution relied in making the determination.
NOTICE OF RECREDIT. If a financial institution recredits a consumer account, the financial institution shall send to the consumer, no later than the business day following the business day on which the financial institution reverses the recredit, a notice of (A) the amount of the reversal; and (B) the date the recredit was reversed.
MODE OF DELIVERY. Any notice described above shall be delivered by United States mail or by any other means through which the consumer has agreed to receive account information.
- OTHER CLAIMS NOT AFFECTED. Providing a recredit in accordance with this section shall not absolve the financial institution from liability for a claim made under any other law, such as a claim for wrongful dishonor under the Uniform Commercial Code, or from liability for additional damages under sections 6 or 10 of Check 21.
- CLARIFICATION CONCERNING CONSUMER POSSESSION: A consumer who was provided a substitute check may make a claim for an expedited recredit under this section with regard to a transaction involving the substitute check whether or not the consumer is in possession of the substitute check.
- SCOPE OF APPLICATION: These expedited recredit rights shall only apply to customers who are consumers.
For more information please call the Members Contact Center at 1-800-999-5887