GMAC Bank : Frequently Asked Questions

Quick answers to your questions. Choose a category below.

What is Check 21?

The Check Clearing for the 21st Century Act, better known as Check 21, establishes what’s known as a “substitute check.” A substitute check has the same legal standing as the original check and can be processed just like the original check.

What is the purpose of the Check 21 Act?

The purposes of Check 21 are:

To encourage banks to use image presentment of checks by allowing a substitute check to replace the original check.
To foster innovation in the check collection system without requiring that banks receive all checks electronically.
To improve the overall efficiency of the United States payments system.

How was the Act developed and by whom?

The Check Clearing for the 21st Century Act was created with the help of banks, consumer advocacy groups and technology companies to streamline the banking system. The Federal Reserve Bank proposed it to the Congress and Senate and it was unanimously passed last October.

What exactly is a substitute check?

A substitute check is a paper reproduction that has been created from an electronic image of the original check and can be processed the same way as the original check. It shows the front and back and includes all of the account information from the original check and contains the statement: “This is a legal copy of your check. You can use it the same way you would use the original check.”

Does the substitute check look like my original check?

The substitute check is the size of a business check and contains the front and back of the original check along with the other information, as it appeared when it was truncated.

Does Check 21 require all checks to be converted to an image?

No, the Check 21 Act encourages banks to use image technology to streamline check processing. And the Act establishes the substitute check, created from an image, to be the legal replacement of the original check that must be accepted for all purposes.

What do banks need to do to prepare for Check 21?

To comply with Check 21, financial institutions must be prepared to accept and process substitute checks by the effective date (October 28, 2004) and to make consumers aware of the Act and what their rights are within the Act.

How are checks processed now?

Traditional check clearing involves the physical movement of paper checks from the location where the check was deposited, to the bank where the funds will be drawn. If there are insufficient funds in the account, the check is sent back to the original bank of first deposit. In total, this process can take several days.

One of the goals of Check 21 is to reduce the time it takes for checks to clear, relying more on automation and less on manual check processing.

There are also current alternatives to processing paper checks. With your authorization the information from your check can be used to make an electronic payment that typically clears the bank the following day.

Does Check 21 preempt state law?

Check 21 supersedes any federal or state law, including provisions of the Uniform Commercial Code; to the extent that such laws are inconsistent with this Act. Laws that apply to checks that are not inconsistent with Check 21 will still apply.

Can institutions or their customers opt out of Check 21?

No. Under the Act, no institution or any of its customers may “opt out” of the Act; all checks are eligible to be converted to substitute checks and all parties that receive checks must accept the substitute check in lieu of the original paper check.

Check 21 affects all customers of banks, savings & loans and credit unions. This includes consumer customers, corporate customers and governmental agencies.

Can government organizations opt out of Check 21?

No. All checks are eligible to be converted to substitute checks and are subject to the Act, including government checks.

What if I need a copy of my canceled check?

GMAC Bank will follow the same check copy request process as it does today; the check copy may just look different. It could be a copy of the substitute check instead of a copy of the original check.

What if I need to prove I paid for something?

The substitute check will be treated the same as the original check under both state and federal law. It will represent legal proof of payment and include the phrase, “This is a legal copy of your check.”

Does the Act apply to all types of customer accounts or only to consumer accounts?

Check 21 applies to all checks and deposit accounts. Every check is eligible for conversion to a substitute check. There are certain provisions in the Act - such as the expedited recredit procedures and the customer education requirements - that only apply to consumers, but the overall scope of the Act applies to all bank customers. More information on these requirements will be available prior to the implementation of the Act.

What will happen to my original check?

The Act puts no check destruction requirements on banks that choose to use substitute checks, check truncation and imaging. Generally, banks destroy the check shortly after making an electronic copy, unless there are reasons why the original is kept longer. In such cases, checks would be properly safeguarded and protected. Electronic check images are generally kept for seven years.

What if there is an error involving a substitute check?

In addition to the same protections that apply to original checks, the Act provides extra protections for substitute checks. The Act requires that the bank provides two warranties; first, that the associated transaction will not double post, and second, that the substitute check created meets the legal requirements for substitute checks as defined within the Act. The act also contains a process by which you will be able to get a recredit for disputed funds within 10 days. This will give the institution time to resolve the matter and allow access to your funds during that time, up to $2,500 for each disputed check.

How will GMAC Bank prevent both the original and substitute checks from posting against my account?

Double posting is a risk that exists in today’s traditional check processing environment as well as in the electronic payments arena. GMAC Bank has a history of minimizing such occurrences through the diligent application of quality controls.

Will this change the way I write checks?

No. You may continue to write checks and present them for payment the way you currently do. However, because your checks may be presented and cleared electronically, it may take less time for a check to clear your account. To make sure you do not bounce checks or overdraw your account, you should always make sure you have sufficient funds on deposit before you write your check or sign up for overdraft protection on your account.

Will I be charged extra for this electronic check conversion?

No. At this time we are anticipating no additional charges for the electronic processing of your check as a result of Check 21. In fact, the process will allow checks to clear more quickly, reducing fraud.

Will there be additional fees for substitute checks?

Additional fess may apply to produce a copy of a substitute check, just as there may be a fee to reproduce past copies of checks or monthly statements.