This is an interesting article that I was on our credit unions website:
New checking system will eliminate 'in the mail'
By MARY DEIBEL
9/13/2004 6:14:00 AM
Starting next month, don't try telling creditors, "The check is in the mail." That claim won't work after Oct. 28, the day the Check Clearing in the 21st Century Act _ or "Check 21" _ kicks in and lets banks instantly process your checks electronically and return a digitally-imaged "substitute check" instead of the original.
The change starts with next month's bank statement:
_ Your bank will no longer be required by law to return your canceled checks with your statement so you'll need to keep close watch on the checks you write and the balance in your account.
_ Your check will clear the moment a creditor images it to your bank, denying you those extra days of "float" between the time you write the check and the money actually gets subtracted from your bank account, increasing the likelihood you may "bounce" a check.
You'll see Check 21's instant impact first on your bigger checks _ mortgage payments, insurance checks, tax bills and the like _ because it's worthwhile for big creditors to invest in instant digital imaging technology that lets them deposit your money and put it to work ASAP.
No. 1 retailer Wal-Mart, for instance, already scans your check, debits your account and hands the check back to you at many store cash registers to speed payment, cut costs and minimize fraud. Smaller retailers likely will be slower to invest directly in the change at first, but their daily bank deposits will be processed faster.
Up until now, federal law has required that checks be physically presented for payment, which meant the 42 billion checks Americans write each year had to be trucked and flown around the country for "presentation."
But three events convinced Congress and President Bush to change the law:
_ Americans increasingly do business online. Sixty million e-filed tax returns this year. And 13 million U.S. households now pay bills online _ a number that should grow to 22 million by 2010, according to Online Banking Report.
_ Soaring use of credit and debit cards has sent the use of cash and checks plunging from 81 percent of consumer spending in 1990 to 61 percent last year. And just as credit cards once included carbon copies of sales slips, banks are betting that consumers are willing to accept the "substitute check" instead of the original.
_ The 9/11 terrorist strikes brought transportation and check clearing to a halt, leaving $47 billion worth of checks floating in financial limbo for days and convincing the Federal Reserve Board to urge the change.
Fed Chairman Alan Greenspan acknowledges that, even in the digital age, many people still prefer paper checks because of privacy and security concerns and a "deep psychological connection between money and tangible wealth."
Donald Ogilvie, president of the American Bankers Association, says that "electronic and paper systems will continue to coexist" even as the change stands to save his industry an estimated $2.1 billion a year during the transition.
But when online payments cost 10 cents apiece to handle _ about a third of what it costs to process a paper check under the current system _ smart money says the change is likely to be accelerated.
By Oct. 28, your bank:
_ Must install the technical means to accept "substitute checks" for collection.
_ Let you and other customers know what Check 21 is and how it affects you.
_ Establish procedures for "recrediting" your account in case of payment disputes.
Also, Congress and the administration left it to the industry to develop standards for acceptable "substitute checks," which needn't be the same size, color or background pattern as your original check
Consumer groups say the Fed hasn't gone far enough in requiring consumer protections for Check 21, which gives you the right to demand "recredit" of a disputed check amount of up to $2,500 plus interest within 10 business days of notifying your bank of the problem while it investigates.
You must discover the error and complain by phone, in writing or by e-mail within 40 calendar days of the mistake, however, and you must present the "substitute check" as evidence your account has been improperly debited.
That assumes you have the "substitute check," which your bank may or may not have sent you in your monthly statement. Also, in all likelihood your bank doesn't have your original check back in case fraud is suspected, and "substitute checks" cannot be examined by handwriting experts for pen pressure and for watermarks, microprinting and other anti-fraud techniques.
After you report the error, your bank has 45 calendar days to determine if your claim is valid and refund you any balance plus interest that remained in dispute.
Even though federal regulators didn't buy calls from consumer groups to make the rules more "consumer-friendly," Consumers Union and Consumer Federation of America are urging consumers to sign an online petition at cu.convio.net/check21. Their goal is to convince banks to speed up consumer deposits the same way they subtract checks from their accounts and to waive fees initially for bounced checks. Consumers can sign the petition online at cu.convio.net/check_21.
Meantime, if you hope to avoid problems, Consumers Union senior attorney Gail Hillebrand says:
_ Make a written request that your bank "recredit" funds mistakenly subtracted from your account.
_ Ask for substitute checks to be returned with your bank statement every month.
_ Don't write checks unless you have the money in your account, or you'll pay big time for bounced checks.
_ Decline your bank's invitation to voluntarily give up return of your checks, so-called "voluntary check truncation," or you'll have even fewer rights to dispute bank account mistakes.
On the Net: www.federalreserve.gov
www.aba.com
www.consumersunion.org
www.consumerlaw.org
(E-mail Mary Deibel at deibelm(at)shns.com. Distributed by Scripps Howard News Service, http://www.shns.com)
© 2004 Scripps Howard News Service.
All Rights Reserved.
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