About Check 21

In today's payment system, paper checks must be physically moved from where the check is deposited to the financial institution that pays the check. This process can take several days, sometimes weeks, to complete. But the wait - and the cost of moving checks - will decrease with Check 21, a new federal law for financial institutions effective October 28, 2004.

Check 21 doesn't change how people or businesses write checks. Instead, it impacts how checks are processed by financial institutions. By enabling financial institutions to scan paper checks and send images to electronic processing, Check 21 creates more efficient ways of processing checks.

Check 21 Myths & Realities
The first step to understanding Check 21 is to identify facts and common misperceptions about the legislation. For example, a common misperception is that Check 21 requires check imaging or that all financial institutions accept checks electronically. In reality, Check 21 simply provides new options for check processing.

Common Myths about Check21

The legislation Mandates the use of check imaging
Check 21 Authorizes image exchange
Retailers are required or mandated to handle check conversion at the point-of-sale

Check 21 Realities

Checks aren't going away. Check 21 supports the use of checks by creating a more efficient processing system.
With a more streamlined process, checks will clear faster.
Check 21 will help financial institutions to more quickly detect check fraud.
Check 21 changes will be gradual because check imaging requires long term planning.


About Substitute Checks
Check 21 enables financial institutions to speed up check processing by creating and transmitting electronic images of checks known as "substitute checks." A substitute check is a paper copy of the front and back of the original check created from a scanned image. It is slightly larger than the original check, and contains the following information:
An image of the front and back of the check
All the information from the original check
Information on how the check was deposited.
A statement indicating the image is the legal copy of the original check.

Here's how it works:

Once a check is deposited, financial institutions can create an electronic image of the check and transmit the image called a substitute check to another financial institution for processing. Check 21 provides the rules and guidelines for the use of substitute checks and provides protections to those who may receive a substitute check.

Substitute checks can be used for record-keeping or proof of payment the same way as the original check. Check 21 provides a special refund procedure (called "expedited re-credit"), if people receive a substitute check and there is an issue or error with the account. Each financial institution will provide information on how this new refund procedure works.

Here's an example that might be seen in statements. In most cases, the actual image of the check design will only be shown in black and white to make it easier to read the written portions of the check after the check imaging process.


What Check 21 Could Mean To You
DFS Although Check 21 is effective for financial institutions on October 28th, 2004, not all consumers and small businesses will see changes immediately. Some financial institutions will be early adopters of new check imaging technologies, and others will implement changes more gradually.
For Financial Institutions
Check 21 will impact every financial institution in one way or another, since they must be ready to accept check images from other financial institutions. It is essential that financial institutions understand and adapt to the new regulations and requirements, and make necessary adjustments to their check processing systems.

Top priorities include:
Educating employees and customers about Check 21
Preparing internal check operations to receive or accept substitute checks
Communicating to customers about their protections under Check 21
Planning for the future on how Check 21 could be implemented

For Consumers
Consumers won't see a difference when they write checks, but they'll notice the effects of processing changes under Check 21.
Checks will clear faster. For example, a check deposited in New York from a bank in Los Angeles may be posted in a matter of hours rather than days.
With faster check clearing, financial institutions may be able to detect fraud faster.
Consumers will likely have more options in viewing bank statements electronically

For Small Businesses
Check 21 does not require small businesses to change the way they make deposits or accept checks from customers. All checks drawn on U.S. financial institutions are eligible for electronic processing with Check 21. Changes small businesses may see include:
A faster return and collection of checks
Quicker access to revenue from customers who pay by check.
Alternatives for returning checks in monthly statements, providing options for secure storage of images or substitute checks.
Some financial institutions will use Check 21 as the opportunity to promote new services or deposit options designed for small businesses.


How PPH Is Responding
DFS The PPH Group is dedicated to providing as much information as possible to you.  As any new developments arise, we will update you through this special section.

The impact of Check 21 will become apparent as an increasing number of financial institutions begin to utilize electronic processing. As a trusted partner and leader in the check printing industry, PPH is a knowledgeable resource for helping financial institutions and their customers navigate these changes.

Here are some of the ways we are preparing to make the transition easier:

Product and Image Quality: PPH is committed to image quality, and our products are designed and tested to meet industry standards.
Education: Check 21 will likely cause confusion among consumers and those in the industry when the legislation is implemented in October. Education is the key. As changes develop, PPH will monitor and update our tools and resources to make this transition easier for financial institutions
Check Security and Fraud Prevention: PPH is testing existing and new security features to ensure that checks will remain one of the most popular and safe methods of payment.
Innovation & Opportunities: Check 21 will promote change and create more choices for customers and small businesses. PPH is participating in industry groups to identify areas where future change is needed
Impacts to Check Operations: Check 21 will encourage automation and provide a more streamlined approach to check processing.


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