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| I heard that something called Check 21 will change how I receive cancelled checks with my bank statements. What is Check 21? |
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| Check 21 is Federal legislation that went into effect on October 28, 2004. Check 21 permits banks to use a new type of negotiable item called a "substitute check."
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| What is the purpose of the law and why was it implemented? |
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| Check 21 was created to improve efficiency in the US banking system. It allows banks to exchange check images electronically, reducing the need to transport paper checks for presentment between banks. In the event of a natural disaster or terrorism, the check exchange process can continue more efficiently. |
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| What is a substitute check? |
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| A substitute check is a paper reproduction of an original check. It contains an image (both the front and back) of the original check. It is the legal equivalent of the original check provided it accurately represents the original item and contains the following legend. "This is a legal copy of your check. You can use it the same way you would use the original check."
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| Are there any charges associated with Check 21? |
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| No. At the current time, no fees will be assessed for the use of substitute checks.
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| Do I have a choice whether or not to receive substitute checks? |
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| No. This is a Federal Law and as of October 28, 2004 all banks were required to accept substitute checks. It is Sovereign Bank's practice to comply with all federal laws. |
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| Will substitute checks be returned with my statement? |
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If you normally receive paper checks with your statement, you may notice some of your checks will be substitute checks. Sovereign will be passing on to you what we receive from other banks, whether that is an original check or a substitute check.
If you receive check images in your statement, you may notice some of the images look slightly different; if Sovereign receives a substitute check we will display the check portion from the substitute check and place it on your image statement.
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| I thought Massachusetts and New York have a law that states a bank must return customers' cancelled checks if requested? |
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| Yes, but we have been advised that federal law, specifically Check 21, supersedes state and local regulations. In addition, as the banking industry moves further to image exchange, there will be fewer paper checks available for return. If you currently receive cancelled checks, some of your checks may be substitute checks. Sovereign will be passing on to you what we receive from other banks, whether that is an original check or a substitute check. However, Sovereign provides, at no cost to you, full image statement, where a copy of each paid check image is enclosed with your monthly statement. That way, you will always have proof of payment for your records, but won't need to continue storing cancelled checks. |
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| If I want my original checks back even though a substitute check was issued, how can I get them? |
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| You may not always be able to have your original checks returned to you. This change is due to the fact that we may not receive the cancelled check from the bank of deposit. The original check is destroyed. It is not possible to retrieve an original check if a substitute check has been created. Remember, the substitute check is the legal equivalent of the original check.
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| What happens to my original check? |
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| The entity that truncated the original check is responsible for destroying the original check to ensure that your account will not be charged twice for the same check.
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| What does Sovereign Bank provide if I request a photocopy of one of my cancelled checks? |
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| Sovereign will provide a copy of the check you request in the form it was presented to us for payment: original check or substitute check. Just like a copy of an original check from a bank, a copy of a substitute check is considered appropriate for proof of payment.
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| If I request a copy of my paid check, is there a fee? |
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| Business customers receiving image statements or that have check truncation may request 12 free check copies annually. Check copy requests in excess of 12 are $5.00 each. For business customers receiving check return, a $5.00 fee applies for every check copy request.
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| Who do I contact for a copy of my check? |
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| You may contact any Community Banking Office or the Business Solution Center at 1-877-768-1145 to request a copy of the substitute or copy of the original check, if available.
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| I receive check images now with my statement. Will I continue to receive these images? |
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| Yes, you will continue to receive imaged checks with your statement.
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| What happens if the original check is destroyed and then the substitute image is also lost (e.g. computer malfunction)? |
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| We would follow the same process as today when a check is lost or destroyed in the check collection system. You may request a copy of the check and you will receive a "photo in lieu," which is a photocopy of the check that is certified to be a legal equivalent.
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| When will the funds be debited from my deposit account? |
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| Funds will be debited upon receipt of the check, original or substitute, just as is currently the process today. However, if a substitute check has been created from the check you issued, the check clearing process might be expedited so the debit could happen faster than for a paper check. |
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| As a result of Check 21 will my checks clear my account faster? |
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| As increasing numbers of banks participate in image exchange, faster check clearing times will occur. It will become increasingly important for you to closely monitor your account balance in order to avoid unexpected overdrafts and related charges.
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| What about the collection time of my deposits, won't I collect on those faster as well? |
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| Sovereign continuously reviews check clearing times and the impact on our Funds Availability policy. In addition, the Federal Reserve Bank reviews check clearing times and the impact on Regulation CC—Expedited Funds Availability Act. The Federal Reserve Bank has stated the "Funds Availability" section of Regulation CC will be revised 30 months from October 28, 2004. This change is expected since the Fed anticipates the majority of financial institutions will be fully participating in image exchange by that time. Image exchange by nature of its process results in faster check clearing times.
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| What's the difference between Check Imaging/Image Statement and Check 21? |
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Check Imaging: Sovereign receives the original check back from the processing bank. Instead of returning the original check, an image of the check is provided in the customer's account statement.
Check 21: This federal law is designed to improve the national check collection system. With Check 21, it is possible that the bank may receive a substitute check instead of the original check. All banks must comply with this new law and must accept substitute checks.
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| Doesn't Check 21 require image exchange? |
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| Image exchange, the use of digital check images in place of paper checks to collect funds, is not required by Check 21.
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| If a check I deposit is returned to me in the form of a substitute check, what can I do with it? |
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Since a substitute check is the legal equivalent of the original paper check, the next steps are the same as if you receive a return deposited item today. So, depending on the reason for the return you may be able to:
- Redeposit the substitute check into your account
- Cash it a branch or the paying bank
- Follow-up directly with the maker of the check
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| Can I capture images of the checks I receive at my place of business and transmit them to Sovereign for collection? |
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| Yes. With Onsite Check DepositTM you can scan checks at your office and deposit them by transmitting images of those checks to the bank via the Internet.
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| I heard that there are recredit rights for consumers. What does a business do in case of a discrepancy with a substitute check? |
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| Businesses are subject to the standard industry recredit policies, procedures, and timeframes currently in place.
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| When did Check 21 take effect? |
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| Check 21 took effect October 28, 2004.
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Equal Housing Lender - Member FDIC
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