I ran across some old check book registers recently. I was just out of school at the time and counting every penny. I had a list of when I could expect any particular check to clear tucked into the back of this old register along with a couple of receipts. But beginning October 28, 2004, this little exercise became obsolete. That’s when Check 21 went into effect. 
 
Check 21 is The Check Clearing for the 21st Century Act, and it was enacted to allow financial institutions to send money between themselves more quickly. Before Check 21, you could reasonably expect to write a check to your local grocery store chain and not see it deducted from your account for several days. This time period was referred to as “float,” when your check was sort of floating in cyber-space before your account was accessed. Actually, Credit Unions have been handling such transactions more quickly than banks for years, but some large banks are just now getting on board with Check 21. (Another reason your Credit Union can keep rates lower!) 
 
If you do receive paper copies of checks in your bank or credit union statement, you may see a slightly smaller than life-size version of your check included in your statement. That’s called a “substitute check,” and it is part of the workings of Check 21. There are rigorous standards for substitute checks before they can be considered “real” in the sense that they will be regarded as legal tender. Another time you might see a substitute check is if someone has written you a bad check which you then deposited. Your credit union might return a substitute check to you instead of the actual check you deposited. 
 
So how does all this shorten that “float” time? Well, if you write a check to a merchant for a purchase, that merchant’s financial institution will send an electronic request for payment to your financial institution. The actual paper check you wrote won’t physically be sent, and may even be destroyed at some point in the process. Instead, the transfer of funds is done electronically, and therefore much more quickly than in the days before Check 21. Does this make you nervous? Well there are safeguards. Let’s suppose you ordered and paid for an expensive item with your check. Then when you inquire about its delivery, you are told the merchant has no record of your purchase, yet the money was deducted from your account. As usual, your Credit Union won’t let you down. You can simply request a copy of your check, and your Credit Union can provide you with a substitute check, or a legal copy, of your original check. 
 
Check 21 also provides the consumer with the right to dispute amounts withdrawn from their accounts should the amount not match the amount the original check was written for. Also, Credit Unions provide their members with disclosures which explain consumer rights in regard to the use of electronic access to funds and any related costs to consumers. For example, if funds were withdrawn electronically, and perhaps posted twice instead of once, the consumer has the right to ask for any associated fees to be returned as well as for lost interest to be replaced. 
 
If you experienced an overdraft charge, for example, when an electronic check amount was withdrawn incorrectly, or in too large an amount, you can ask for your overdraft fee to be refunded to your account. You also have the right to receive interest lost on those funds which should not have been withdrawn. The Check 21 regulations provide for a formal process for consumers to dispute charges or errors they believe were made as a result of the electronic process. But what if you were counting on the “float,” and the electronic system caught you off guard? Well, that’s a different matter. What Check 21 means to the average consumer is that you had better have the money in your account when you write the check. You can no longer count on that “float” which used to give you a couple of days grace before check amounts were withdrawn from your account.