**GAO-09-8**                      Published: Oct 28, 2008. Publicly Released: Oct 28, 2008.                  

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## Highlights

Although check volume has declined, checks still represent a significant volume of payments that need to be processed, cleared, and settled. The Check Clearing for the 21st Century Act of 2003 (Check 21) was intended to make check collection more efficient and less costly by facilitating wider use of electronic check processing. It authorized a new legal instrument--the substitute check--a paper copy of an image of the front and back of the original check. Check 21 facilitated electronic check processing by allowing banks to use electronic imaging technology for collection and create substitute checks from those images for delivery to banks that do not accept checks electronically. Check 21 mandated that GAO evaluate the implementation and administration of the act. The report objectives are to (1) determine the gains in economic efficiency from check truncation and evaluate the benefits and costs to the Federal Reserve System (Federal Reserve) and financial institutions; (2) assess consumer acceptance of the check truncation process resulting from Check 21; and (3) evaluate the benefits and costs to bank consumers from check truncation. GAO analyzed costs for the check operations of the Federal Reserve and a group of banks, interviewed consumers about their acceptance of and costs and benefits of electronic check processing, and analyzed survey data on bank fees. The Federal Reserve agreed with the overall findings of the report.

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## Topics

Auditing and Financial Management

Bank depositsBank managementBanking lawBanking regulationCheck disbursement or controlCost accountingCost analysisCost effectiveness analysisEconomic policiesElectronic data processingFederal regulationsFederal reserve banksFinancial analysisFinancial institutionsFinancial managementFinancial regulationLending institutionsSurveysTechnology