Congress paved the way for remote deposit capture when the Check Clearing for the 21st Century Act, commonly known as Check 21, went into effect in l2004.
While the physical check no longer needs to be delivered to the bank, companies can’t just get rid of the paper documents, says Joe Cornelius, Key Bank’s vice president, senior product manager, global treasury management.
“Once you’ve truncated the check, you now have the original,” Cornelius says. “Check 21 law is very specific; you shall not put the original check through the payment system if you’ve already deposited the substitute check. It’s very important that the original checks be safeguarded for a reasonable period of time.”
How long isn’t specified, but a company does need to be able to provide the check if there is some sort of dispute.
“That’s a new obligation on the part of the customer,” Cornelius says. “It’s a new way to make a deposit, rather than the current method might be. That’s not a down side; it’s just a change for a company to operate.”