On October 28, 2003, President Bush signed into law The Check Clearing for the 21^st Century Act (Check 21).  This Act becomes effective October 28, 2004.  The Act was presented to our lawmakers by the Federal Reserve System, who since 2000 had been investigating a way of improving the check payment system and make check processing faster.  Check 21 encourages the use of electronics by empowering credit unions and banks to truncate original checks, process them electronically and, where necessary, provide paper substitute checks.  This new negotiable instrument, or “Substitute Check,” is a reproduction of the original check that contains an image of the front and back of the original check, bears the MICR line of the original check and is suitable for automated processing.  If the substitute check meets the Act’s requirements, it is the legal equivalent of the original paper check and no one can refuse to accept it as such.  The following information will be placed on the front left side of the substitute check  “This is a legal copy of your check.  You can use it the same way you would use the original check.”  All checks, except foreign checks, are eligible to become substitute checks.

Since Substitute Checks are processed electronically, checks you write today may appear for payment to your account in today’s share draft file at the credit union.  With the possibility of your checks clearing so quickly, deposits to your account must be made before you write checks to avoid overdraft protection fees and insufficient fund fees.

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  The losses you may attempt to recover under this procedure may include the amount that was withdrawn from your account and fees that were charged as a result of the withdrawal (for example, bounced check fees).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 the 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 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.

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 1-800-652-2328 or at any of our branch offices.  You must contact us within 40 calendar days of the date that we mailed you a copy of the substitute check 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 a description of why you have suffered a loss (for example, you think the amount withdrawn was incorrect); an estimate of the amount of your loss; an explanation of why the substitute check you received is insufficient to confirm that you suffered a loss; and a copy of the substitute check and/or the following information to help us identify the substitute check: (identifying information, for example the check number, the name of the person to whom you wrote the check, the amount of the check).

Anytime after October 28, you may receive a copy of a substitute check when you request a copy of a paid check from the credit union or as a deposited check that has been returned unpaid.  You may also see a substitute check instead of the original check when viewing check images via online banking.