Banks implement Check 21 starting Thursday

AP ^ | 10/28/4

[SmithL]

NEW YORK (AP) --

New federal regulations designed to speed up the processing of checks went into effect on Thursday, and consumer advocates advised Americans to be more vigilant about monitoring their accounts.

The Check Clearing for the 21st Century Act -- better known as Check 21 -- will allow financial institutions to exchange electronic images of consumers' checks rather than transporting the actual paper checks around by air, land and sea.

As a result, checks that consumers write are likely to clear faster than before, so there will be less "float" between the time a check is written and when funds are debited from the account.

And consumers who still get their checks back with their statements -- about 36 percent of bank customers -- are likely to begin seeing images of some checks among the paper ones.

The changes won't happen overnight.

Forrester Research of Cambridge, Mass., estimates that it will take until the end of the decade for banks and credit unions to digitally process checks from start to finish. It said that some major banks won't have fully implemented image exchange processes until about 2008.

Still, consumer advocates warn that if check writers aren't careful, they could easily overdraw their accounts and end up paying late fees and other penalties.

[Tuscaloosa Goldfinch]

That happened to me last year (blush) I forgot to account for a check I wrote, and they paid the largest first, and then force paid the smaller ones. I called when I discovered this and questioned them about it, and their answer was that they pay the largest first, assuming that the customer would want his housepayment paid rather than a check to the grocery store.

I don't know that I agree with this -- I'd rather call one company and apologize than call three.

[pyx]

I don't know that that practice will be discontinued.

I believe the practice of having PHYSICAL RECORDS will continue. The issue is one based on PROVENANCE. Provenance is a complex legal requirement for the ORIGINS and verification of an AUDIT TRAIL.
Without going into great detail, there is a requirement for certain types of banking instruments to be physical in nature. A search of the Web for PROVENANCE gives a far better description than I ever could.

[evets]

[zzen01]

All of this Double Standard stuff that the banks do BEGS a MASSIVE Class action lawsuit!

[dirtboy]

I called when I discovered this and questioned them about it, and their answer was that they pay the largest first, assuming that the customer would want his housepayment paid rather than a check to the grocery store.

That's a load of bull, some wiseguy with an MBA figured that one out. I've worked with banks for too long to give them the benefit of a doubt, that they are doing this for any other reason than to get more fees from the situation, given that they in most cases know the chronological order of the transactions and have already adjusted the available balance prior to posting.

[Wolfie]

There was quite a bit of discussion on another thread about whether electronic images of your checks will really hold up as proof of payment as compared to the actual check. I guess we'll have to wait and see.

[skaterboy]

I think they keep em and you get an electronic print out but they keep the actual check..maybe im wrong or maybe each bank is doing it their own way but mine just gives you a photostat of all of your checks

[Strategerist]

Obviously, what we need then is a big federally funded program to have the folks who used to fly checks around fly pieces of white paper back and forth.....

[Skooz]

I was watching some financial show the other day and one of the panelists made the point that banks are "positively drooling" (her words) over this legislation because they stand to collect tens of millions of dollars in new overdraft charges.

[Polyxene]

YUP! The banks will still "hold" deposits for two to three days, but "clear" checks written immediately! Can you say double standard?

[Tuscaloosa Goldfinch]

I think you're right.

[snopercod]

About the only way for a pilot to make money and build hours these days is by flying drugs /sarc.

[hardhead]

Now I don't know if she were speaking authoritatively or not, but I was talking with a customer service manager at our local Wally World and she told me that when the system is implemented and the cashier runs a check through the register, the register will read the routing information, connect to the bank, and debit the account - sort of a cheap debit card. If the money ain't there, the register will spit it out.

[ridesthemiles]

Morning news shows are stating that banks expect to make $170 MILLION a MONTH in overdrawn charges starting today.

[Hurricane Andrew]

Under Check 21, the electronic image that is created is referred to as a "substitute check" and carrys the legal weight of the original. As such, there really is no question of whether or not they will hold up as proof of payment. They will.

[kellynla]

"Can you say double standard?" and I can also say "scam"...

[hunter112]

I like getting my canceled checks back but with this you dont so if you got a problem then good luck proving it

Yep, I've got every one I ever wrote to my ex for child support, and if I have my way, I'll be buried with them, too! With the so-called "Check 21", I'm just glad that my support obligation ended over three years ago.

Now, when will those nimwits figure out how to credit deposits instantly???

[grellis]

Like I typed, I have already asked my bank (BankOne, recently acquired by Chase) about this. Its business as usual with the exception of the post time. If I'm not mistaken, all banks allow you to choose if you want your checks back or if you want photostats instead, with the bank warehousing the checks for you. My bank charges for the return of cleared checks so I get the photostats--its easier for bookkeeping, anyway. Our checks come with duplicates so I always have some kind of a record on hand.

My advice: Write down any questions you have, call your bank's toll free customer line, get the facts straight. Be sure to get the name of the telephone representative, don't hesitate to ask them to slow down in their explanations if you are jotting stuff down. Break yourself of the habit of floating checks immediately. What are you, the government??!

FReegards!

[blackdog]

US Check, an actual division of the Federal Reserve had it's own Learjet airline which serviced every federal reserve city after picking up the checks from the smaller guys. They had at least sixty Lears when I delt with them in the 90's. Imagine the operating budget for a fleet of learjets that size. I was once told that the float money captured was $20,000,000,000 per week by one of the lear pilots. Using that much money for free for a week is a real hoot.