The Check Clearing for the 21st Century Act, or Check 21, was the name given to an act of American legislature that was passed on October 28, 2003, and took effect a year later. Check 21 has modified the way in which payments by check are processed in the United States, and streamlined communication between American banks. Banks by which Check 21 is chosen to use, process checks much more rapidly that affects consumers who are in the habit of “floating” when they write checks.
“Floating” refers to writing a check when in the account the funds are insufficient.
Electronic communications between banks
Electronic communications between banks are regulated by check 21. Now, there is no need to send a physical check to clear it, Bank B can now simply send an electronic image. Bank A confirms that the check is valid and then it instantly transfers the funds.
