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FAQS FOR TREASURY CUSTOMERS1. What is Check 21? The Check Clearing for the 21st Century Act, better known as Check 21, is a new federal law that goes into effect on October 28, 2004. Check 21 establishes what’s known as a “substitute check.” A substitute check is created during the check collection and return process and has the same legal standing as the original check and can be processed just like the original check. 2. What is the purpose of the Check 21 Act? The purposes of Check 21 are:
3. How was the Act developed and by whom? The Check Clearing for the 21st Century Act was created with the help of banks, consumer advocacy groups and technology companies to streamline the banking system. The Federal Reserve Bank proposed it to the Congress and Senate and it was unanimously passed in October 2003. 4. What exactly is a substitute check? A substitute check is a paper reproduction that has been created from an electronic image of the original check during the check collection and return process; it can be processed the same way as the original check. It shows the front and back and includes all of the account information from the original check and contains the statement: “This is a legal copy of your check. You can use it the same way you would use the original check.”
5. Does Check 21 require all checks to be converted to an image? No, the Check 21 Act encourages banks to use image technology to streamline check processing. The Act establishes the substitute check, created from an image during the check collection and return process, to be the legal replacement of the original check that must be accepted for all purposes. 6. What do banks need to do to prepare for Check 21? To comply with Check 21, financial institutions must be prepared to accept and process substitute checks by the effective date (October 28, 2004) and to make consumers aware of the Act and what their rights are within the Act. Banks have the option of creating substitute checks; Check 21 strongly encourages financial institutions to use check imaging – but it is not required. 7. How are checks processed now? Traditional check clearing involves the physical movement of paper checks from the location where the check was deposited, to the bank where the funds will be drawn. If there are insufficient funds in the account, the check is sent back to the original bank of first deposit. In total, this process can take several days. One of the goals of Check 21 is to reduce the time it takes for checks to clear, relying more on automation and less on manual check processing. 8. Does Check 21 preempt state law? Check 21 supersedes any federal or state law, including provisions of the Uniform Commercial Code; to the extent such laws are inconsistent with this Act. Laws that apply to checks that are not inconsistent with Check 21 will still apply.
9. Can institutions or their customers “opt out” of Check 21? No. Under the Act, no institution or any of its customers may “opt out” of the Act; all checks are eligible to be converted to substitute checks and all parties that receive checks must accept the substitute check in lieu of the original paper check. If bank customers receive checks back with their statement, they may get substitute checks instead of original checks. Check 21 affects all customers of banks, savings & loans and credit unions. This includes consumer customers, corporate customers and governmental agencies. 10. Can government organizations “opt out” of Check 21? No. All checks are eligible to be converted to substitute checks and are subject to the Act, including government checks. 11. Does this mean I won't be getting back my canceled checks? After October 28, 2004, customers who choose to get their checks back in their monthly checking account statement may start to receive substitute checks in place of some originals. Those customers who receive check image statements or view their checks online may also notice that some of their checks have been changed into substitute checks. At Wachovia, many customers are already taking advantage of image technology by choosing not to get their checks back. The following choices are available to you, as a customer:
12. What if I need a copy of my canceled check? Wachovia will follow the same check copy request process as it does today; the check copy may just look different. It could be a copy of the substitute check instead of a copy of the original check.
13. Does the Act apply to all types of customer accounts or only to consumer accounts? Check 21 applies to all checks and deposit accounts. Every check is eligible for conversion to a substitute check. There are certain provisions in the Act - such as the expedited recredit procedures and the customer education requirements - that only apply to consumers, but the overall scope of the Act applies to all bank customers. 14. What will happen to my original check? The Act puts no check destruction requirements on banks that choose to use substitute checks, check truncation and imaging. Generally, banks destroy the check shortly after making an electronic copy, unless there are reasons why the original is kept longer. In such cases, checks would be properly safeguarded and protected. Electronic check images are generally kept for seven years. 15. What if there is an error involving a substitute check? In addition to the same protections that apply to original checks, the Act provides extra protections for substitute checks, including two new warranties: first, that the associated transaction will not double post, and second, that the substitute check created meets the legal equivalency requirements for substitute checks as defined within the Act. 16. How will Wachovia prevent both the original and substitute checks from posting against my account? Double posting is a risk that exists in today’s traditional check processing environment as well as in the electronic payments arena. Wachovia has a long history of minimizing such occurrences through the diligent application of quality controls. We will continue to apply similar controls to help prevent posting both original and substitute checks.
17. Will this change the way I write checks? No. You may continue to write checks and present them for payment the way you currently do. However, because your checks may be presented and cleared electronically, it may take less time for a check to clear your account. To make sure you do not bounce checks or overdraw your account, you should always make sure you have sufficient funds on deposit before you write your check or sign up for overdraft protection on your account. 18. Will Check 21 impact Treasury Services’ existing payables products? We conducted a review of Wachovia’s disbursement product line, including Controlled Disbursement, Account Reconcilement, Positive Pay and Check Image, and believe the impact of Check 21 on these products will be minimal. What may change: Original checks will not always be available. In these situations, substitute checks will begin appearing in your bank statement if you currently receive original checks back, on Wachovia’s check image and image positive pay products, and/or on copies provided by our research areas. [Note: The bank that introduces the substitute check into the check clearing process will primarily determine the quality of substitute check. This may or may not be Wachovia.] 19. Will Check 21 impact Stop Payments/Returns? Wachovia may begin using substitute checks in the returns process. Use of substitute checks in this manner should not impact your account. You should continue to issue stop payments as you do today. However, you may receive inquiries from your payees who are not familiar with Check 21 if a stopped check is returned to them as a substitute check. 20. Will checks that I write clear faster? The checks you issue may clear more quickly. Particularly for cross-country points, electronic exchange and/or substitute checks may be used to speed up the collection process by eliminating physical transportation of the original check.
21. Will Controlled Disbursing be a viable product after Check 21? Yes. Although some checks may clear faster, the value of knowing when each check will clear should not diminish. Controlled Disbursement reports and reporting times are not expected to change as a result of Check 21. 22. Will Check 21 impact Treasury Services’ existing depository products? Substitute checks should not directly impact your deposits. However, Wachovia and any bank in the collection process may convert an original check to a substitute check. As a result, you may receive inquiries from your remitting customers who are not familiar with Check 21 if they receive a substitute check back and/or if their checks begin to clear more quickly. 23. Will deposited checks that are returned be impacted? Substitute checks are expected to play a significant role in the returns process after Check 21 becomes law. As a result, a significant portion of your deposit returns may be presented as substitute checks and you may learn about them sooner, improving your chances for collection. 24. Can I still go to the branch and redeposit checks that are returned to me by Wachovia if they are substitute checks? Yes, you can treat Substitute Checks exactly as you do original checks, provided they were created/endorsed within the banking system. If you intend to use software or employ a vendor to create Substitute Checks from original checks for deposit or redeposit at Wachovia, prior express written consent from Wachovia is required.
25. What can my company do to further benefit from Check 21? Your company may choose to begin electronically delivering check deposits to the bank, allowing you to speed delivery and eliminate time and cost inefficiencies associated with transportation. Wachovia has announced plans to offer Remote Desktop Capture, which provides you the software and desktop equipment that facilitates scanning checks, automating deposit preparation and securely transmitting your daily check deposit to the Bank. Contact your Treasury Sales Officer for details and product availability. 26. What if my company is interested in electronically delivering deposits to Wachovia? Wachovia’s Remote Customer Capture service will soon be available for companies who can send image deposits to Wachovia using their own remittance equipment and software. Wachovia will then clear your image deposit using the most appropriate clearing channel – image exchange or the printing of substitute checks. Contact your Treasury Sales Officer for details and product availability.
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