House approves Check Truncation Act

Today, Aug 2003

Senate Approves as Well-Bill Expected to be Law by Summer's End

Just as the TAWPI Conference was getting underway, the U.S. House passed the Check Clearing for the 21st Century Act, or Check 21 Act, by a vote of 405-0. Just after the TAWPI Expo ended, the Senate passed its version as well. House and Senate Committees will have to resolve differences in the two bills, but there is a general expectation that the bill will become law before the August recess.

The Check 21 Act allows banks and other financial institutions to process consumer checks electronically eliminating the need to physically send paper checks from bank to bank, transmitting the image instead.

The Senate version of the Bill is substantially similar to HR 1474, "Check Clearing for the 21st Century Act", which passed without opposition in the House earlier this month. As expected, the Banking Committee accepted the consumer protection compromises outlined in the House version of the bill, and overwhelmingly approved it with no substantive mark-ups.

According to information provided by CheckClear, the joint conference should move the bill rapidly toward a final bill for both chambers to consider and vote on before the August recess. There seems to be unanimous agreement among the leadership in both the Senate and House that this Bill represents "good government" legislation, meaning it will produce a tangible benefit, in this case an improved check-clearing system.

When passed into law, the Bill would permit financial institutions to clear checks electronically rather than having to forward the original paper check. In cases where a hard copy of a check is needed, a "substitute check" could be downloaded from the electronic image and delivered to the bank. The legislation provides legal equivalence for these substitute checks.