Tool 4: Communicating About Check 21

Reporters will need background information when writing about Check 21. By providing them with this fact sheet, your bank can serve as a valued resource.

Check 21 Media Fact Sheet

  • Check 21 will improve the way checks are cleared and paid,using a process known as “check truncation.” Check truncation uses state-of-the-art technology to convert paper checks to digital images that are processed securely and electronically through the banking system. Before Check 21 legislation was passed, check truncation could only occur if the banks involved had prior written agreements with their customers.
  • Check 21 creates a new negotiable instrument, the “substitute check,”which can be used for proof of payment and has all of the legal properties of the original. A substitute check is a paper “image” of your original check – both front and back, with all endorsements – and is about the size of a business check. The check images on statements that are common today are not substitute checks.

  • Currently, most checks must be physically transportedacross town or across the country for clearing. Because of this new law, check images can travel across the country electronically allowing for more efficient processing, cheaper overhead costs, and better fraud prevention.
  • Check fraud can be discovered faster with Check 21. Faster detection means faster resolution for the customer; speed may also increase the possibility of apprehending the criminal.
  • Electronic and paper systems will continue to coexist. Check 21 does not mandate electronic check processing; it just makes it possible.
  • Check 21 was signed into law on October 28, 2003 and becomes effective October 28, 2004. Customers will begin to see substitute checks after October 28, 2004.

General Facts About Check Payments

  • Banks process more than 40 billion checks each year. In the first comprehensive study in decades, the Federal Reserve reported that 42.9 billion checks, valued at $39 trillion, were paid in 2001.
  • The average value per check is $925, according to the 2002 Federal Reserve Retail Payments Research Project.
  • Consumers write over half (50.9 percent) of all checks, according to the Federal Reserve’s research. Other categories include: business, with 32.3 percent of the total; government, with 3.5 percent; business/government with 1.3 percent; 12 percent are unknown.
  • Nearly 60 percent of consumers today do not receive cancelled checks in their monthly account statements, according to an ABA telephone survey of 1,000 consumers in January 2004.
  • Checks make up 15 percent of all consumer payments at the point-of-sale, according to the ABA Consumer Payment Preferences Study (December 2003). Other POS payment methods include: cash (32 percent) debit cards (31 percent), credit cards (21 percent), and prepaid cards (2 percent).
  • Attempted check fraud at U.S. banks totaled more than $4.3 billion in 2001. Actual bank losses totaled $698 million. Bank prevention systems are credited with preventing more than two-thirds of the potential losses.[*]
  • The first widespread use of checks was recorded in Hollandin the early 1500s. In 1681, the first U.S. checks were used by a Boston businessman who mortgaged his land to a “fund,” against which he could write checks.

AMERICAN BANKERS ASSOCIATION1

[*] From the ABA Deposit Account Fraud Survey,which concentrates on collecting baseline information on check and electronic payment fraud losses, and the actions taken or planned by banks to reduce these losses.