NCUA Issues Regulatory Alert on Check 21

ALEXANDRIA, Va.-The Check Clearing for the 21st Century Act (Check 21) becomes effective on October 28, 2004, and NCUA does not want credit unions to forget about it. In Regulatory Alert 04-RA-12, NCUA Chairman JoAnn Johnson alerted credit union board members that Check 21 is coming up on the scene fast. “Check 21 revises the clearing and payment system by enabling financial institutions participating in the system to process items electronically,” she wrote. “For some credit unions, the act will require a mass mailing of disclosures in November. For most credit unions, the act will require an occasional distribution of disclosures.” Additionally, under Check 21, any financial institutions in the clearing and payment system can truncate the check, where as current rules require the institution to wait until it received the original item through the system. Johnson explains several other aspects of the new law and regulations as well, including the substitute check. However, “Check 21 does not require that processors truncate, so it is possible that a member may receive an original cancelled share draft if requesting one (e.g., to provide proof of payment),” she said.