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What is a
substitute check?
Effective Oct. 28, 2004
in order to make check processing faster, federal law permits financial
institutions to replace original checks with "substitute checks".
These checks are similar in size to original checks with a slightly reduced
image of the front and back of the original check. The front of a
substitute check states: "This is a legal copy of your check. You can
use it the same way you would use the original check." You may use a
substitute check as proof of payment just like the original check. Some or
all of the checks that you receive back from us may be substitute checks.
This notice describes rights you have when you receive substitute checks
from us. The rights in this notice do not apply to original checks or to
electronic debits to your account. However, you have rights under other law
with respect to those transactions.
The following sample shows what a substitute check looks
like.
Front of Substitute Check
Back of Substitute Check
Not all copies of a check are substitute checks. For
example, pictures of multiple checks printed on a page (also known as an
image statement) that is returned to you with your monthly statement are
not substitute checks. Online check images and photocopies of original
checks are not substitute checks either. You can use image statements and
other copies of checks to verify that your credit union has paid a check.
Image Statement
What are my
rights regarding substitute checks?
In certain cases, federal law provides a special procedure that allows you to
request a refund for losses you suffer if a substitute check is posted to
your account (for example, if you think that we withdrew the wrong amount
from your account or that we withdrew money from your account more than
once for the same check). The losses you may attempt to recover under this
procedure may include the amount that was withdrawn from your account and
Chicago Municipal Employees Credit Union fees that were charged as a result
of the withdrawal (for example, NSF check fees). The amount of your refund
under this procedure may be limited to the amount of your loss or the
amount of the substitute check, whichever is less. The Credit Union will
not be responsible for other losses or fees incurred due to processing
errors by other financial institutions. Those claims must be submitted to
the receiving financial institution that processed your check originally.
You are entitled to dividends on the amount of your refund if your account
is a dividend bearing account. If your loss exceeds the amount of the
substitute check, you may be able to recover additional amounts under other
laws.
If you use this procedure, you may receive up to $2,500
of your refund (plus, dividends if your account earns dividends) within ten
(10) business days after we receive your claim and the remainder of your
refund (plus dividends, if applicable) not later than forty-five (45)
calendar days after we receive your claim.
However, we may reverse the refund (including any
dividends on the refund) if we later are able to demonstrate that the
substitute check was correctly posted to your account.
How Do I Make a
Claim for a Refund?
If you believe that you have suffered a loss relating to a substitute check
that you received and that was posted to your credit union account in error,
please contact us at Chicago Municipal Employees Credit Union, 33
North LaSalle Street, Ste. 300, Chicago,
IL. 60602, phone number 312-236-2326.
You must contact us within forty (40) calendar days of the date that we
mailed (or otherwise delivered by a means to which you agreed) the
substitute check in question or the account statement showing that the
substitute check was posted to your account, whichever is later. We will
extend this time period if you were not able to make a timely claim because
of extraordinary circumstances. Your claim must include:
• A
description of why you have suffered a loss (for example,
you think the amount withdrawn was incorrect);
• An estimate of the amount of your loss;
and
• An explanation of why the substitute
check you received is insufficient to confirm
that you suffered a loss.
• A copy of the
substitute check or the following check information to help us identify the substitute check: (check number,
payee, amount and date of check).
What if I have more
questions about substitute checks?
Contact your Chicago Municipal
Employees Credit Union.
Visit the online information on Check 21.
Check
21 Facts
What is Check 21?
The Check Clearing for the 21st Century Act, commonly referred to as
"Check 21" is legislation that will revolutionize the check
processing world. Signed into law on October 28, 2003, and effective one year later, the
new law will facilitate the cost efficiencies of check truncation. Check 21
encourages image based processing and truncation. This law does not mandate
truncation, it mandates that a financial institution:
• Accept substitute
checks
• Treat substitute checks as legal
equivalents of an original paper
check
• Provide informational notices to
consumers
• Adopt new expedited re-credit
procedures for substitute checks
Specifically, the act creates a new legal instrument
called a "substitute check", which allows financial institutions
to truncate the original paper check to process the check information
electronically and to deliver substitute checks to financial institutions
that want to continue receiving paper checks. Under the act, a financial
institution no longer can demand the original paper check, but instead
receive a substitute check. Because substitute checks could be processed
just like original paper checks, a financial institution would not need to
invest in new technology or otherwise change its current check processing
operations.
What is
Truncation?
Truncation is the removal of an original paper check from the collection
process. The check information is captured electronically in a data file
and the original paper check is destroyed. When a check is truncated, the
recipient does not receive their original paper check back.
What is a
"Substitute Check"?
A substitute check is a paper image of an original paper check that has all
the legal rights as the original paper check. A substitute check must
contain an image of the front and back of the original paper check, bear
all the information appearing on the MICR line of the original check,
conform in paper stock and dimension, be suitable for automated processing,
and contain the words: "This is a legal copy of your check." You
can use it in the same way you would use the original check.
What does a
substitute check look like?
A substitute check is approximately 3.75 X 8.5,
contains a leading "4" in the MICR line and includes an image of
the original paper check (front and back) with additional endorsements such
as the reconverting bank, bank of first deposit and truncating bank routing
number and a legend.
What is a
reconverting bank?
A reconverting bank is the financial institution that created the
substitute check or the first financial institution that transfers or presents
the substitute check for payment.
What will be
the impact on members?
• Faster clearing times
• Faster return check notification (NSF,
stop payment, etc.)
• Reduced check float time
• Returned check may be a substitute
check (returned to
member due to…)
• Copies of paid checks may be copies of
substitute checks
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