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Check
21 Signed into Law
On
Tuesday October 28, 2003, President Bush signed the Check Clearing for
the 21st Century Act, or Check 21 into law.
With
a 12 month window for enactment, the new legislation will go into effect
on October 28, 2004, and will enable financial institutions to generate
substitute checks, or image replacement documents (IRDs), with the same
legal status as an original check.
The
purpose of Check 21 is to (1) facilitate check truncation by authorizing
substitute checks; (2) to foster innovation in the check collection
system without mandating receipt of checks in electronic form; and (3)
to improve the overall efficiency of the Nation’s payment system.
The
impetus for enactment came after the attacks on September 11 disrupted
the nation’s check collection and forwarding process. Currently the
nation’s check clearing system relies on paper-processing and physical
transport, making it susceptible to weather, natural disasters,
terrorist activity, and other potential disruptions.
The
key benefits of Check 21 to financial institutions include expedited
funds collection and availability, expedited detection of fraud, and a
reduction in non-interest expenses. Check 21 will provide the maximum
efficiency to financial institutions that have implemented Image
Archive, Image POD, Power Encode, and CAR/LAR technologies.
For
those institutions that have not yet implemented check imaging
technology, the new legislation does not mandate implementation.
However, non-imaging institutions will not recognize the benefit of
reduced item clearing costs, and may find themselves in the unfortunate
position of not being able to return a customer’s original cancelled
checks (resulting in a blended statement with part check images and part
cancelled checks.)
A
copy of both the House and Senate versions of the CTA are available
below for downloading. For additional information, contact BankWare at
(205) 408 9998 x 273.
October
28, 2003 - Check 21 Act signed by President Bush
Final Version of the Check Truncation Act.pdf
October 3, 2003 -
Congressional Report on the Check Truncation Act
Check
Truncation Act Update October 3, 2003.pdf
June
5, 2003 - The US House of Representatives unanimously approves HR 1474
– Check Truncation Act
HR1474.pdf
June
26, 2003 – The US Senate unanimously approves S 1334 – Check
Truncation Act
S1334.pdf
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