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Check Processing Enters the 21st Century
What you need to know about the new law that changes the way we process checks.
A new federal law, The Check Clearing for the 21st Century Act, also known as Check 21, will change the way checks clear your account. Currently, when you write a check to an individual or a business and they deposit it, their financial institution must physically transport the check to your financial institution in order to "clear" the check. With Check 21, this is no longer necessary. Check 21, which becomes effective October 28, 2004, gives financial institutions the option of creating, processing and exchanging a legal copy, a "substitute" check is actually an electronic duplication of the original check (showing both front and back), which can be processed electronically.
The purpose of the act is to create better efficiency and security in the check processing sysytem and to reduce processing time. The new system will mean that checks will clear your account more quickly because financial institutions will not be required to transport the physical check in order to process it. Today's existing check payment system exchanges over 40 billion checks a year. Supporters report that the new law could reduce the cost of transporting paperwork cross-country by $2 billion a year.
A substitute check will be the equivalent to the original check. A substitute check must:
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Include an accurate representation of both the front and back of the original check;
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Bear a magnetic ink character recognition (MICR) line with all the information from the original;
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Conform to the industry standards for substitute checks;
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Be as suitable for automated processing as the original; and
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Contain a disclosure that states, "This is a legal copy of your check. You can use it the same way you would use the origianl check."
What does check 21 mean for you?
Georgia Flordia United Methodist Federal Credit Union members will still be able to access copies of their checks via Internet banking.
The speedier processing possible with Check 21 also means that "floating a check" will virtually never work! A check that once would have taken days to clear will now clear in hours. The best advice for credit union members is always to be certain funds are present in your account before writing a check.
If you have questions regarding Check 21, call a member service representative at 770-565-3794.
Substitute Checks and Your Rights
What is a substitute check?
To make check processing faster, federal law permits banks to replace original checks with "substitute checks." These checks are similar in size to original checks with a slightly reduced image of the front and bakc 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 the original check." You may use a substitute check as proof of payment just like the 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 law with respect to those transactions.
What are my 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, if you think that we withdrew the wrong amount from your account or that we withdrew money 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 result of the withdrawal (for example, bounced check fees).
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 also are entitled to interest on the amount of your refund if your account is an interest-bearing account. If your loss exceeds the amount of the substitute check, you may be able to recover additional amounts under other law.
If you use this procedure, you may receive up to $2,500 of your refund (plus interest if your account earns interest) within 10 business days after we received your claim and the remainder of your refund (plus interest if your account earns interest) not later than 45 calendar days after we received your claim.
We may reverse the refund (including any interest on the refund) if we later are able to demonstrate that the substitute check was correctly posted to your account.
How do I make a claim for a refund?
If you believe that you have suffered a loss relating to a substitute check that you received and that was posted to your account, please contact us at 1991 Lower Roswell Road, Marietta, GA 30068 and 770-565-3794. 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 were not able to make a timely claim because of extraordinary circumstances.
Your claim must include:
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A description of why you have suffered a loss (for example, you think the amount withdrawn was incorrect);
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An estimate of the amount of your loss;
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An explanation of why the substitute check you received is insufficient to confirm that you suffered a loss; and
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A copy of the substitute check or the following information to help us identify the substitute check; the check number, the name of the person to whom you wrote the check, and the amount of the check.
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