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Check Clearing for the 21st Century Act

Learn how this law enables your business to run more efficiently.

What is Check 21?

The Check Clearing for the 21st Century Act (Check 21) became effective on October 28, 2004. The law designed to foster innovation in payments and to reduce legal impediments. The law facilitates check truncation by creating a new negotiable instrument called a substitute check, which permits banks to truncate original checks, to process check information electronically, and to deliver substitute checks to banks that want to continue receiving paper checks. A substitute check is the legal equivalent of the original check and includes all the information contained on the original check.

The law does not require banks to accept checks in electronic form nor does it require banks to use the new authority granted by the Act to create substitute checks.

Why use Check 21?

First of all, this will allow you to submit checks electronically. If you want to collect money from your customers without having to wait for the check to arrive in the mail, the Check 21 is the way to go. Checks can be scanned and sent directly to the bank with Remote Deposit Capture (RDC) or checks can be submitted through a virtual terminal which are then converted into substitute checks. Both of these processes reduce paperwork and the time it takes for checks to be processed.

The time it takes for the check to cleared and for the funds to be in your account vary. However, because the deposits are electronic, and because the Federal Bank is behind the processing of electronic checks, the funds are usually available within 24 to 48 hours. This is very similar to the time it takes for credit card funds to be available.

Processing Electronic Checks is Safe

Electronic check processing is not new to the financial industry and is a safe and reliable way of processing payments. It uses technology that has been developed to process check information securely. The payment information is entered into an encrypted website and sent directly to the bank for processing. Should for any reason a customer feel that the transaction was a mistake, the services were not up to their satisfaction, or the product was not as expected, the customer can simply contact their bank and cancel the check.

Of course, the merchant can issue a refund as well but either way you can safely and easily get your money back. In addition, Check law protects against erroneous and unauthorized check payments. Check 21 contains a number of new protections for consumers. For example, it contains a special refund procedure (called expedited recredit) for a consumer who suffers a loss related to a substitute check he or she received.

How to Get Started Processing eChecks

MMS has long been a provider of eCheck services. Our payment platform is designed to accept echecks just as easily as credit cards. Just as you would enter your card number, expiration date, and security code, to process an eCheck you would enter the account number, bank routing number, and check number. Everything else such as name, address, email, and phone number remain the same. To make things even simpler, MMS has a simple interface and can provide you with a virtual terminal payment page so that you can get started fast and without any technical hassle.