ANSI - American National Standards Institute
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Standards Key to Passage of Electronic Check Clearing Legislation

New York, Oct 29, 2003

In the age of instantaneous communication and automated teller machines, consumers often find themselves perplexed to be waiting days for a check to clear. Banks are currently required by law to physically transmit original paper checks between financial institutions for processing. According to Representative Mike Oxley (OH), chairman of the House Financial Services Committee, “the current system uses the equivalent of the pony express, when technology allows for a quick and secure electronic system.”

This cumbersome delay was answered when Congress recently passed a Conference Report on HR 1474, otherwise known as the “Check 21 Act,” which was signed into law by President Bush on October 28, 2003. HR 1474, now Public Law #108-100, will permit electronic checks to legally substitute their original paper copies in order to expedite processing. Rather than waiting for a check to be physically transported to the original institution and back, the information would be transmitted electronically.

Certain financial institutions, which have formed independent agreements to mutually recognize electronic checks, have implemented this technology successfully. Congress recognizes the demand for wider implementation of this practice and has passed HR 1474 to grant substitute checks legal status as long as the digital image fits applicable standards.

HR 1474 was a result of consultations between the American National Standards Institute and congressional staff on the reliability and utility of electronic check standards. According to David Karmol, VP for Public Policy at the American National Standards Institute, “This legislation provides a great example of what can be accomplished when ANSI works in partnership with its accredited standards developers and supplies the appropriate information to those in government.”

The electronic check clearing standards originated with the ANSI Accredited X9 Committee. X9 develops and publishes voluntary, consensus technical standards for the financial services industry, in the areas of check processing, electronic check exchange, PIN management and security, financial industry use of data encryption, and wholesale funds transfer, among others. Its membership represents a wide variety of interests in financial services, from investment managers and banks to association members and government regulators. ANSI X9.90, Specifications for an Image Replacement Document, forms the basis for this technology and legislation.

According to Chairman Oxley, "Voluntary consensus standards developed by ANSI are an important building block for the effective use of this technology, and the Committee appreciates the information provided by ANSI during the consideration of HR 1474."

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