They're only in it for the money
October 26, 2004 8:27 AM Subscribe
Your Check Won't Float As of Thursday, October 28, "floating" checks will become a thing of the past. Be forewarned or stand by for major insufficient funds fees on your accounts. More info inside.
posted by Pressed Rat (71 comments total)
« Older BitTorrent of Excel Saga episode 1.
It is funny. ... | Chris Harding Animation Concer... Newer »
< http://www.consumersunion.org/finance/ckclear1002.htm>
[< http://www.federalreserve.gov/paymentsystems/truncation/default.htm>>
Check 21 is a change in banking law regarding check processing by financial institutions. You should follow-up with your personal financial institutions for specific questions about how your checks will be handled, and whether there are implications to your person accounts.
Detailed Article: "Check 21" starting in late October 2004
You've probably bought something in a store with a check even though you don't have the money in your account at the time. You figure you have a few days for the check to clear, and by then the money will be there. It's called the "float." Well, the float is slowly becoming a thing of the past.
Because of a new law going into effect in October, money will be drafted from your account immediately when you write a check. It's called "Check 21," and it allows retailers to scan your check through a machine that deducts the cash within minutes. It's essentially the end of the paper check system, the check will eventually be destroyed. There will be an image of the check online and that will serve as proof if you need it.
What about checks that you deposit? Well, the float is no longer available to you, the customer. But the bank still will hold a deposit for a few days to make sure it clears. It's not fair, but it's the way it's happening.
What are the main effects of "Check 21" on consumers?
-- You won't be able to get your original paper checks back, because your bank will no longer have them.
-- Checks you write will clear sooner, increasing the risk that a check will bounce if funds are not in the account when you write the check. Don't
write a check unless the funds are already in the account to cover it
-- You may not get access to the funds from checks you deposit any sooner, because the new law does not shorten check hold times. After 30
months, there must be a study on whether banks are making funds available to consumers earlier than the allowable hold periods.
--· Different kinds of copies of a check will have different rights attached. Check 21 creates a new kind of paper copy of an electronic image
of a check. This special kind of copy is called a "substitute check." Only a substitute check can be the legal equivalent of the original check, and only a substitute check triggers your right to re-credit of disputed funds. A regular copy of a check does not carry these same protections. If you ask for a copy of a check, your bank may send you an ordinary copy instead of this special kind of copy which triggers legal rights and protections unless you ask for a substitute check.
-- A bank other than your bank will have your original check, and will decide whether to destroy it. Neither Check 21 nor other law requires a bank
to keep your original check for any period of time. Before Check 21, your own bank decided how long to keep your original checks, if you didn't get them returned with your statement. Under Check 21, the bank of the person you wrote the check to may decide when to destroy your check.
-- Consumers will get new rights for some electronically processed checks, but not for others. When a so-called "substitute check" is provided to a consumer, Check 21 gives the consumer a right to have funds of up to $2,500 re-credit to the consumer's account in 10 business days if the check is paid twice, paid for the wrong amount, or otherwise paid in error. The statute is ambiguous about whether this new right applies when a paper substitute check is used in the processing of the check but is not returned to the consumer. The regulations restrict the right of re-credit only to checks where the consumer was provided with a substitute check. If a check is processed electronically by all the banks it is routed through without the use of a substitute check and the consumer is not provided with a substitute check, then the check remains under state check law. In that case, the consumer does not receive a 10 day right of re-credit even if the electronic image of the check is paid twice, paid for the wrong amount, or if both the electronic image and the paper check are paid.
-- Consumers who want to maximize their consumer rights should ask for return of "substitute checks" with their checking account statements. Watch out for fees associated with a substitute check-returning account. Look for another bank if your bank charges a high fee to get copies of all your checks as substitute checks.
-- Only the special "substitute check" can be legally equivalent to the original check to prove payment. The copies that a bank sends to consumers
under a so-called "voluntary truncation" agreement, where the consumer agrees not to get the checks back, do not prove that a payment has been
made, and do not trigger your Check 21 re-credit right.
When do these changes go into effect?
Check 21 becomes effective October 28, 2004.
posted by Pressed Rat at 8:29 AM on October 26, 2004