The Check 21 Act DEMO

In 2000, the Federal Reserve Board began to investigate the ramifications of promoting check truncation and electronic check presentment in the United States. The initial concept was to allow a financial institution to substitute a “machine-readable” check copy (or a “substitute check”) for the original check for forward collection or return. It also looked at creating requirements for “substitute checks” that would allow them to be legal replacements for original checks.

In December 2001, the check truncation and electronic check presentment proposal was sent by Chairman Greenspan to the Chairs and Ranking members of the Senate and House Banking Committees. Both committees introduced bills to Congress in 2003. In 2003, the Check Clearing for the 21st Century Act, or Check 21 Act, was signed into law and became effective in 2004. It is an historic Act for two reasons:

  • It is the first and only time the Federal Reserve proposed new legislation to Congress; and
  • The entire financial industry actively supported the law.

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