What Businesses Should Know About Check 21

Summary

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The Check Clearing for the 21st Century Act was enacted to facilitate check truncation (i.e., conversion), foster innovation and improve the efficiency of the payment system, particularly by promoting the transition from paper to electronic check processing. Ultimately, banks, businesses and consumers will all benefit from Check 21 because checks will clear faster and the banking industry will reduce its reliance on a system of clearing checks that wastes money, burns fuel and clogs the transportation system. Businesses that are concerned about check fraud should talk with their bank about fraud deterrence tools such as "positive pay." Companies that handle large volumes of incoming checks may have opportunities under Check 21 to reduce clearing times and improve funds availability. Businesses also may have the opportunity to work with their banks to capture check images at their own locations and deposit them electronically. Generally, banks warrant that a substitute check contains a faithful copy of the original and that the item will not be presented more than once for payment. If this warranty is breached, the bank is liable for any resulting damages that the customer suffers.

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What Businesses Should Know About Check 21

Spurred by the shutdown of the air transportation system after 9/11 that left hundreds of billions of dollars worth of checks sitting idle at airport tarmacs, Congress last year passed a law to modernize the nation's check payment system.

The Check Clearing for the 21st Century Act was enacted to facilitate check truncation (i.e., conversion), foster innovation and improve the eff...

See the full content of this document

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