What is the Check Clearing for the 21st Century Act?

The Check Clearing for the 21st Century Act, also known as Check 21, is a federal law that was enacted in 2003 in Washington. It was designed to facilitate the quicker, easier and more secure transfer of funds between banks. It does this by allowing for the electronic transfer of a check’s information (known as “substitute checks”) rather than the traditional paper checks. Before Check 21, banks had to physically transfer the check from one bank to another, often taking days for the transfer to be completed. The electronic transfer of the check’s information allows the check to be processed more quickly, often within one business day. Banks can also store the substitute checks, allowing them to be processed and settled more quickly. In addition to the faster transfer time, Check 21 also makes it easier for banks to search for missing checks and detect fraud. This is done because the substitute check contains information such as the account numbers, names, and amounts that are needed to identify the check. Overall, Check 21 has allowed banks to transfer funds faster, easier, and more securely, making it easier for citizens of Washington to access their funds and make quicker purchases.

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