Since the Act only covers substitute checks, what is the point of the Act and how will it help the banking industry?
The Act allows banks to make unilateral decisions to truncate all checks and replace them with substitute checks. The significance of Check 21 is not that it allows the conversion of one paper check to another paper check but rather that it encourages the use of technology to improve the overall efficiency of the check payment system. By promoting the use of image technology, the Act promotes the elimination of many costly processing steps. Under the Act, a depositary bank could, for example, image capture a deposited check at the earliest point of entry into the bank, for example at the branch, and never process the original check again. For deposited on-us items for which the drawing customer wishes to receive paper documents in their statements, the depositary bank (also paying bank in this example) could print substitute checks in the appropriate sequence at the time of statement preparation and no additional physical sorting would be required. Beyond Check 21, the use of image tec
