Check 21 - Imaged checks

Little embarassed to admit but I don't really know how/if Check 21 affects our bank. We have sent imaged checks for at least the last 5 years. Operations Officer tells me we are never considered a reconverting bank and we never transfer, present, or return a substitute check (or a paper or electronic representation of a substitute check). So does Check 21 apply to us? If yes, how?

Getting ready for Compliance Exam so quick help is apprciated.

When you say you have sent imaged checks for at least the last 5 years, are you referring to check copies with your customers' monthly statements? Check 21 is not related to that.

Your bank or one of your customers could still receive a substitute check and you need to know how to process it. For example, if your customer writes a check and it becomes an image that is reconverted to a substitute check somewhere along the clearing chain, you are required to treat it as you would the original. You would also need to be able to recognize when a substitute check meets all of the requirements that make it the legal equivalent of the original.

For example, if your customer writes a check to someone and it is converted to an image and then reconverted to a substitute check and your bank returns it unpaid, that payee could come into your bank with the substitute and cash it. That substitute check is the legal equivalent of the original and your branch folks would need to know that.

Another example, if your customer requests an original of a paid check from their statement and it is a substitute check, you would need to provide them the disclosure reqired by 229.57.

Subpart D to Reg CC contains more than you probably want to know about Check 21.