What Is a Substitute Check?

A substitute check is a paper copy of a check that a bank uses in place of the original check. The bank requires a copy of both the front and the back of the check. Substitute checks have text declaring that the check is a legal copy. Banks use substitute checks to obtain payment from other banks and expedite the check-clearing process.

Key Takeaways

  • A substitute check is an electronic copy of a paper check and is accepted as a legal copy of the original check
  • Banks use substitute checks to expedite the check-clearing process.
  • Only banks can create substitute checks.
  • A bank can use an image or photocopy of a check to make a substitute check. However, an image made by someone else alone cannot be used as a substitute check.

Understanding Substitute Checks

The Check Clearing for the 21st Century Act, or Check 21 Act, was enacted on Oct. 28, 2003. The law allows for anyone to practice check truncation. This is a practice by which electronic copies of checks, or substitute checks, eliminate the need for the physical document to complete the check-clearing process.

A substitute check created by a bank is considered a legal copy of the original check

What a Substitute Check Is and Is Not

Only banks can create substitute checks. When a person or business creates images of a paper check to complete a remote deposit, the bank receiving the deposit may use those images to create a substitute check. However, an image or photocopy of a check alone cannot be used as a substitute check.

Nor is a converted check a substitute check. A converted check is a written check that is used to initiate an electronic payment. Converted checks are governed by automated clearning house ACH regulations while substitute checks are governed by federal and state check laws, the Uniform Commercial Code (UCC), and regulations specific to the use of checks.

Substitute Checks as Proof of Payment

As a result of the Check 21 Act, banks have started to create electronic copies of paper checks to cut costs and speed up check processing times. Since banks started using substitute checks, voided paper checks may no longer be returned to customers for record-keeping purposes. In some instances, consumers can ask their banks to provide substitute checks for proof of purchase purposes (such as for tax-related purposes).

Fast Fact

The Check Clearing for the 21st Century Act permitted the use of substitute checks to eliminate the need for physical checks to complete the check-clearing process.

Most banks make electronic copies of voided substitute checks available to customers as part of their online banking services. If necessary, customers can print off these electronic copies along with all the information that accompanies them to use as proof of payment. This process creates an image replacement document or income in respect of a defendent (IRD). Because a substitute check is considered the legal equivalent of the paper check it was created to replace, a copy of the voided substitute check can be accepted as proof of payment in the same manner as a voided paper check.