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Introducing Check 21

The Check Clearing for the 21st Century Act, commonly known as Check 21, became effective on October 28, 2004. The law was designed to foster innovation and efficiency in the payment system and reduces some of the legal impediments to check truncation. Truncation means removing an original paper check from the check collection or return process.

Check 21 smoothes check truncation by creating a new negotiable instrument called a substitute check. A substitute check makes it possible to process check information electronically. Electronic transmittal of check information reduces the time needed to clear checks from days to hours. As a result, consumers must be sure that there are always funds in their checking account to cover every check they write. The law mandates that all institutions must accept a substitute check.

What is a substitute check?

To make check processing faster, federal law permits financial institutions to replace original checks with "substitute checks." Substitute checks are similar in size to original checks with a slightly reduced image of the front and back of the original check. The front of a substitute check states: "This is a legal copy of your check. You can use it the same way you would use a substitute check as proof of payment as you would an original check. Some or all of the checks you receive back from us may be substitute checks. This notice describes rights you have when you receive substitute checks from us. The rights in this notice do not apply to original checks or to electronic debits to your account. However, you have rights under other laws with respect to those transactions.

When will you see a substitute check?

You might receive a substitute check if:

  • You occasionally request a copy of one of your paid checks and the check has been converted to an electronic file in the payments process, it will be reconverted to a substitute check to fulfill your request.
  • You deposit someone's check into your checking or savings account, and that check turns out to be a bad check, you will receive the bad check back in the form of a substitute check if, during the payment process, that check ever had been converted to an electronic file.

What are your rights regarding substitute checks?

In certain cases, federal law provides a special procedure that allows you to request a refund for losses you suffer if a substitute check is posted to your account. For example, you can request a refund if the wrong amount was withdrawn from your account or money was withdrawn from your account more than once for the same check. The losses you may attempt to recover under this procedure may include the amount that was withdrawn from your account and fees that were charged as a result of the withdrawal. The amount of your refund under this procedure is limited to the amount of your loss or the amount of the substitute check, whichever is less. You are also entitled to dividends on the amount of your refund if you account is dividend-bearing. If your loss exceeds the amount of the substitute check, you may be able to recover additional amounts under other laws. If you use this procedure, you may receive up to $2,500 of your refund (plus dividends if your account is dividend-bearing) within 10 business days after we receive your claim and the remainder of your refund no later than 45 calendar days after we receive your claim. We may reverse the refund (including dividends) if we later are able to demonstrate that the substitute check was correctly posted to your account.

How do you make a claim for a refund?

If you have suffered a loss relating to a substitute check you received that was posted to your account, you may submit an expedited refund claim by writing to us at the address listed on your statement. You must contact us within 40 calendar days of the date that we mailed (or otherwise delivered by a means to which you agreed) the substitute check in question or the account statement showing that the substitute check was posted to your account, whichever is later. We will extend this time period if you are not able to make a timely claim because of extraordinary circumstances.

Requesting an expedited refund claim.

To request an expedited refund you must:

  1. Describe why you think the charge to your account was incorrect;
  2. Estimate how much money you may have lost because of the substitute check charge;
  3. Explain why the substitute check is not sufficient to show whether or not the charge to your account was correct; and
  4. Provide us with a copy of the substitute check or give us information that will help us to identify the substitute check and investigate your claim (for example, the check number, the name of the person to whom you wrote the check and the amount of the check.)

What does this mean to you?

The changes mandated by Check 21 should be seamless to you most of the time and should not affect the way you use your checking account. If you have any questions, please contact us.

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1st Cameron State Bank,      124 S. Walnut, Cameron, MO 64429-2264,      (816) 632-7272