Money & Finance › Payments & money movement › Checks: how a personal or business check clears
Check 21 Act (2003): check images replace paper
Signed Oct 28, 2003· Law or rule
Fact, law or dataA rule, statute, definition or measured number.
A 2003 federal law that made a check image, printed as a 'substitute check', the legal equal of the original paper.
See it on the Money & Finance map →How it works
Before it, banks flew bundles of paper checks around the country every night; when the September 11, 2001 attacks grounded planes, check clearing stalled for days. The Check Clearing for the 21st Century Act, signed October 28, 2003 and in force a year later, let any bank turn a check into an image and send a printed copy to banks not yet taking images. It forced no one to accept images, but within a few years nearly all checks cleared that way.
Why it matters
It cut clearing from days to about a day, let the Fed retire its check-carrying flights, and paved the way for phone and image-based ATM deposits.
Facts, rules and data
The Act's text (Public Law 108-100), Regulation CC's substitute-check rules, and Fed reports showing Reserve Bank check volume moving from all paper in 2004 to about 99% images by the early 2010s.
Debates and risks
How much image deposit enabled duplicate and altered-check fraud, which climbed sharply in the early 2020s as criminals stole checks from the mail.
Connections (2)
▸Check 21 Act (2003): check images replace paper replaced paper transport of Checks: how a personal or business check clearsFact, law or data
The connection
Before 2004 a paper check had to travel physically from the bank of deposit to the paying bank, by truck and plane. Check 21 made an image, printed as a 'substitute check', legally equal to the original. Banks began capturing images at deposit and sending them on, cutting clearing time and cost, and later allowing phone deposits.
When and why
Signed October 28, 2003 and effective October 28, 2004; by about 2010 nearly all US checks cleared as images.
How we know
Public Law 108-100, Regulation CC subpart D on substitute checks, and Fed reports to Congress on the shift to image exchange.
Debates and risks
Whether faster image clearing slowed or sped the decline of checks, which fell from about 50 billion a year in the mid-1990s to about 11 billion in 2021.
▸Check 21 Act (2003): check images replace paper let check processing shrink at The Federal Reserve System (the Fed)Fact, law or data
The connection
The Fed had been the biggest check clearer, running dozens of processing centers and chartered courier flights. Once images replaced paper, the Reserve Banks cut paper check sites from 45 to one, in Cleveland, by February 2010, with image processing in Atlanta. Check clearing shrank to a small part of the Fed's priced services.
When and why
The Reserve Banks' 2003–2010 consolidation; Atlanta ended paper processing on February 26, 2010.
How we know
Federal Reserve press releases on consolidation, its Check 21 report to Congress, and Regulation CC changes that made more checks 'local' as regions merged.
Debates and risks
Whether the Fed should keep clearing checks at all, or leave it to private image exchanges as volumes keep falling.