San Diego, CA.  Beginning on Thursday, October 28, 2004, a new law takes effect that will change the way checks are processed and returned to people who write them, also called the originator(s), which includes personal checks and also commercial, retail, Treasury and travelers checks.

The new law is called the "Check Clearing for the 21st Century Act" or simply "Check 21." Check 21 encourages the use of image technology by the banking industry to improve the efficiency of the check payment system and also lower check processing costs.

Check 21 authorizes the creation of a new instrument, an "image replacement document" (IRD). An IRD is a substitute check that has been imaged from the original paper version presented to the clearing bank. It has the same legal status - for proof of payment, for example - as an original check.

The IRD contains images of the front and back of the original check including signature(s), the memo line, any endorsements and additional printed information added during the clearing process. Additional merchant written information added to the check at the time of acceptance, such as driver's license or phone numbers will be included in the image on the substitute check. Printed merchant audit information also will be included where it is applicable.

An IRD can be stored electronically, transferred electronically, and then printed out whenever needed. Check 21 requires that each IRD carry the legend, "This is a legal copy of your check. Use it the same way you would use the original check."

If you currently receive your canceled checks with your business checking statement, you will probably not notice much change immediately. However, after Oct. 28, you may notice more and more original checks being replaced by IRDs. If your statement option already suppresses check return, you won't see any change, unless you ask for a canceled check for proof of payment. Then you'll likely receive an IRD instead.

Many major banks are taking advantage of the changes introduced by Check 21 to improve the efficiency of their own check processing and clearance systems and to provide customers with greater service and value.

By the end of 2004, most major bank's check-processing centers will be fully image-enabled. This means that they may be able to offer you a variety of options for accessing your checks - including viewing them online sometime in early 2005.

Another feature of Check 21 is that checks you receive may clear sooner, shortening "float" times. This will enable you to learn sooner when a customer check is returned for non-sufficient funds or "account closed" allowing you to take action faster.