Tools and Resources > The Check Clearing for the 21st Century Act

The Check Clearing for the 21st Century Act

The Check Clearing for the 21st Century Act (Check 21) is a federal law, which became effective on October 28, 2004. Check 21 aims to modernize check clearing and reduce the inefficiencies associated with check handling by eliminating the cumbersome logistics of routing paper checks in the check clearing system.

The most important aspect of this legislation is that a substitute check — a paper reproduction of an original check created by printing an electronic image of a client's original check — as the legal equivalent of a paper check. All banks and their customers must accept substitute checks.

By enabling banks to create substitute checks, the law fosters check truncation, or in other words, removal of the check from the collection and return processes. Banks will have the ability to truncate the original item, process the check information electronically, and if needed, deliver substitute checks to banks that want to continue to receive paper checks.

Frequently Asked Questions

A substitute check is a document created by printing an electronic image of the original check according to established industry standards. Substitute checks can be presented, sent for collection, or returned. Check 21 enables only banks to create substitute checks as an alternative to processing the original paper check. A substitute check includes an image of the front and back of the check and is the size of a conventional business check. The entire magnetic ink character recognition (MICR) line will be included as well as a legend that states: "This is a legal copy of your check. You can use it the same way you would use the original check."

Check 21 legislation requires all parties (banks, government agencies, retail and business customers, etc.) to accept substitute checks in lieu of the original check. All types of checks except foreign checks, Treasury Tax and Loan documents, and United States Savings Bonds are eligible for conversion to a substitute check.

front of substitute check back of substitute check

Today, most checks must be physically transported — whether across town or across the country before they can be cleared. By removing the need for physical transportation, Check 21 helps to eliminate delays that can pose problems for check clearing (i.e. extreme weather conditions or transportation constraints). A collecting bank may now truncate — or in other words, remove the original check from the collection and return processes — by creating an image of the paper check. The check information is then processed electronically, and if needed, substitute checks will be printed and delivered to banks that are not prepared to accept an image of a check. Under the new law, all banks must accept the substitute check as they would have accepted the original.

At first you may not see a change. Using paper checks to pay your bills or make withdrawals and deposits will continue as normal. However, on October 28, 2004 banks, including KeyBank, will be required to accept substitute checks just as they currently accept original checks. Thus over time, more of your checks will be converted and processed electronically, resulting in faster clearance. In addition, if you receive your canceled checks with your checking account statement, you could also receive paper substitute checks which were presented to Key for payment. If you deposited a check that is returned unpaid, you may receive a paper substitute check in lieu of the original. Finally, when viewing your checks through the Online Banking or Key Total Treasury websites, you may see an image of a substitute check. Remember any check has the potential to be replaced by a substitute check.

The bank that chose to convert your check into an electronic image is responsible for the safekeeping and destruction of original checks. In most cases, the original will be destroyed within a few days.

Yes. If you need a copy of a check for proof of payment, you can get a copy of the front and back of your check quickly and easily. The IRS and courts will continue to accept printed check images (i.e. photocopies) as valid proof of payment, so you do not need your original check or an actual printed substitute check — a printed image of either will suffice. If you use our online banking service, you can print a copy of a check that cleared within the last 60 days and/or request a copy of a check that cleared more than 60 days ago, with a click of a button. If you do not have online access to your account, sign up today at or call Key at 888-KEY4BIZ and a check copy will be sent to you. Check copy fees discussed in your Deposit Account Disclosure may apply.

The benefits you will see are all derived from the processing efficiencies achieved throughout the banking system. The faster clearing of checks will reduce the incidences and lessen financial losses caused by attempted fraudulent activities. It will also reduce the time it takes to clear checks you have deposited in your account — you will be notified quicker if these checks are not paid for any reason. In addition, the electronic transfer of check information will reduce the chance that the original check is lost or destroyed in transit. Less paper in the system will increase efficiencies and reduce errors.

The impact of Check 21 will be realized on a small scale beginning October 28. Initially, a limited number of financial institutions may choose to create a substitute check or conduct image exchange. Check clearing times and availability extended to clients may remain unchanged for the foreseeable future. As more financial institutions adopt image exchange, the check clearing cycle may begin to shorten, potentially allowing clients to realize accelerated deposit availability. Similarly, from a check disbursement perspective there may be minimal impact in the near term. As financial institutions implement image exchange technologies, they may begin with processing high-dollar, out-of-district items that may begin to reduce float on items drawn on your account.

Key is recognized as an industry leader in our Check 21 preparation activities and our adoption of image exchange — the electronic processing of check images. Key is committed to ensure our check processing services will have the ability to function as expected in a post-Check 21 environment. This includes the ability to process substitute checks beginning October 28.

Further, we are on track to become one of the first major banks to exchange images by early fall. Our check processing systems are fully image-enabled at each of our four processing sites. We have been selected by the Federal Reserve Bank to be one of two banks involved with their image exchange pilot.

Key is committed to fully support the evolution of the U.S. payments system, including the full-scale implementation of image exchange. We have joined a consortium of seven of the nation's largest financial institutions called the Vanguard banks, a segment of the Small Value Payments Company (SVPCo). Key is one of 20 owner financial institutions of SVPCo, together those owners hold 59% of the nation's deposits.

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