How is the new image-based clearing process in Canada different from that of the United States?
In the United States, the Check 21 Act came into effect in October 2004. Under this legislation, U.S. financial institutions (FIs) are no longer required to exchange actual cheques in the clearing process, and many FIs have begun to exchange cheque images. However, the Check 21 Act does not mandate the exchange of images, so the participation of FIs is voluntary. The CPA initiative is designed as an industry-wide transition to image-based clearing, with all CPA members participating and exchanging cheque images. In the United States, the Check 21 Act also provides for “substitute checks”, which are paper copies printed from the images. These are used primarily in cases where a financial institution does not wish to receive or is not yet capable of receiving images. Under the legislation, substitute checks are the legal equivalent of the original check. In Canada when the new image-based clearing process is introduced, all financial institutions will be participating, and the images wil
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