The U.S. government has enacted a new law, the “Check 21 Act”, that allows U.S. banks to remove an original paper check from the check payment system, capture its image electronically and then destroy the original. A paper reproduction of the electronic image, a “substitute check”, will be the legal equivalent of the original paper check under U.S. State and Federal law provided that it:

(A) accurately represents all of the information on the front and back of the original check at the time it was removed from the payment system; and

(B) bears the legend “This is a LEGAL COPY of your check. You can use it the same way you would use the original check”.

What to Expect

The Check 21 Act is intended to reduce the U.S. check payment system's dependence on physical transportation networks, and streamline the collection and return process.

As a result of this new U.S. law you may receive a substitute check in your statement instead of the original paid check, if you have selected the check return option. Further, should you negotiate a U.S. check and it is dishonoured, a substitute check may be returned to you instead of the original item.

The following check you write or negotiate may be affected:

• U.S. dollar checks drawn on Canadian Banks and negotiated in the U.S.
  Check that are negotiated and processed through the U.S. clearing system may be delivered to Canadian banks in their original paper check format or as a substitute check.
  
  
• U.S. dollar checks drawn on U.S. Banks and negotiated in Canada.
  Once these checks enter the U.S. payment system, they may be converted to substitute checks. If a check is dishonoured by the paying bank, a substitute check may be returned to the Canadian bank that negotiated the original paper check.

To learn more about Check 21, please visit the American Bankers Association and/or Canadian Payments Association.