What is the Check 21 Act?

Check 21 is the common name for the Check Clearing for the 21st Century Act. It's new legislation that was recently passed by congress and made a law when signed by the President of the United States (remember "I'm just a bill" from Saturday morning cartoons). Check 21 basically streamlines the traditional check processing system by incorporating new electronic technology. This new system replaces an outdated check clearing system that banks and other financial institutions have used for many years. The advantage is the ability to cut the time it takes for a check to clear from days to hours.

The process to do this involves a pseudo or substitute check. Check 21 now allows banks to use this in place of original checks. The technique to make this a reality involves converting the information on the check into an electronic file, which is then sent to the maker's financial institution for payment. This significantly speeds up the check clearing process from days to hours. The original check can even be destroyed because a substitute check can be made at any time during the process. This image can be used as a proof of payment just like an original check. In fact the checks look almost exactly like original checks except for a slightly reduced image of both the front and back of the original check.

You can expect to see a substitute check if the original check was converted to an electronic file during the payment process and the check turns out to be a bad check due to non-sufficient funds in the payee's account. The bad check you receive will actually be the substitute check. You may also receive a substitute check if you request a copy of one of your own paid checks provided that check was converted to an electronic file during the payment process. Don't worry the Check 21 law allows you to use the substitute check the same way as if it were the original check involved in the initial transaction or payment.

However, don't expect a rapid rollout of electronic file conversion of checks right away. First financial establishments (such as banks and credit unions) or not required to change from paper to substitute checks due to the large upfront cost associated with investing in the equipment needed to comply with Check 21. Don't worry though many financial institutions will gradually switch to the new system since it will save money over time on the transporting of checks, improve security and mitigate the loss associated with check fraud.

The consumers affected the most by this new change in check clearing will be those individuals that write a check one day and then attempt to transfer money into the account the next day or write a check a day earlier then they are paid via direct deposit. This method of floating money won't be as easy to duplicate since in many cases electronic checks can clear in a little as 4 hours. So although some consumers may feel an initial wakeup call many will embrace the new act simply based on the fact that it should curtail the fraudulent activity currently seen in the financial industry.

Timothy Gorman is a successful Webmaster and publisher of Debt-Relief-Solutions.com. He provides more debt relief, consolidation and credit repair information that you can research in your pajamas on his website.

---

Bad Credit? No Credit? Yeah, Its a Problem.

Many companies use the slogan "Bad Credit? No Credit? No... Read More

Your Consumer Rights

If you have ever fallen behind on your debts you... Read More

Fair Credit Reporting Act: What You Should Know About It?

The Federal Fair Credit Reporting Act (FCRA) is designated to... Read More

Rewards Cards: Are They Worth It?

Virtually all consumers will have a credit card at some... Read More

Credit Card Debt: One Way To Avoid It

One of the biggest problems people have in these modern... Read More

Legislators Ponder New Credit Protection Laws

Legislators in Washington, D.C. are considering several credit-related consumer protections... Read More

How to Order the Right Credit Reports to Repair Your Own Credit

In this week's article, I am going to offer some... Read More

What is on Your Credit Report?

Your credit report is a very important piece of the... Read More

Commercial Collections And Credit Granting

It is estimated that billions of dollars in delinquent commercial... Read More

What Is A Credit Report?

Even if you have heard of a credit report, you... Read More

7 Compelling Reasons Why A Prepaid Debit Card May Be Just The Financial Tool You Need

Prepaid debit cards are great financial tools and may be... Read More

How to Improve Your Credit Rating

So you got into debt, had problems but you got... Read More

Negotiating Rates with Your Credit Card Company

Ok, let's face it, everybody hates high credit card rates,... Read More

Why Credit Cards are a Bad Idea

Credit cards are just so convenient, aren't they? There's no... Read More

Credit Cards: Pros and Cons

Sure, there are a lot of problems with credit cards,... Read More

Borrowing on a Credit Card

One of the easiest ways to borrow money of a... Read More

Beginners Guide to Credit

I remember back when I was 18 and completely oblivious... Read More

Credit Score - Reporting Your Financial Health

Credit score is one of the most basic, determining factor... Read More

Ways to Look Good without Selling Your Soul to the Credit Card Sharks

1. Buy clothes at thrift stores. BEFORE you buy them,... Read More

Credit Trap: What They Dont Tell You About Credit Cards In College

In industrialized nations, going into debt starts early. It's easy... Read More

0% Credit Cards

These days, credit cards in the UK are competing with... Read More

Useful Tips on Borrowing Money

Here are some useful tips on borrowing money. Borrowing money... Read More

Establishing Credit ? What You Need To Know Part 1

Establishing credit is one of the most important things you... Read More

Useful Tips When Choosing Credit Cards

Chances are you have received your share of "pre-approved" credit... Read More

Saving Money: Quick Cash, High Cost

I didn't think it was possible. But it is. Folks,... Read More

Free Credit Report ? A Website Typo Could Be Costly

In 2003, Congress passed the Fair and Accurate Credit Transactions... Read More

Understanding Your Rights Under The Equal Credit Opportunity Act

It wasn't all that long ago that lenders blatantly discriminated... Read More

Collection Agency Secrets for Collecting on Bad Debt

Getting worried that one of your clients, customers or patients... Read More

The Next Person With Credit Problems Got Their First Credit Card Today!

One of the focus areas of my information is the... Read More

Rewards Cards - Are They Right For You?

Rewards cards have become the latest rage in the credit... Read More

Manage Your Credit Wisely

Getting your first credit card is a big deal and... Read More

How Healthy Is Your Credit

There's only one way to discover the "health" of your... Read More

5 Surefire Ways To Eliminate Credit Card Debt

Do you have enormous credit card debt? You are certainly... Read More