Fed approves proposed rule for Check 21 Act

Bank News, February, 2004 by Anonymous

A proposed rule to amend Regulation CC and its commentary to implement the Check Clearing for the 21st Century Act has been approved by the Federal Reserve Board. The Check 21 Act becomes effective Oct. 28, 2004.

To facilitate check truncation and electronic check exchange, the Check 21 Act authorizes a new negotiable instrument called a "substitute check" and provides that a properly prepared substitute check is the legal equivalent of the original check for all purposes. A substitute check is a paper reproduction of the original check that can be processed just like the original check. The Check 21 Act does not require any bank to create substitute checks or to accept checks electronically.

The Fed's proposed amendments (1) set forth the requirements of the Check 21...

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