Check 21 — Changes Coming for Check Writers

[Vixen]

Check 21 — Changes Coming for Check Writers

A new federal check processing law takes affect on October 28, 2004. The legislation is called Check Cashing for the 21st Century or Check 21. It will affect those of us with checking accounts in two ways - checks will clear much faster and substitute checks will replace the originals we wrote. Here's how it will work:

When the person to whom you wrote a check deposits it in their financial institution, it will be converted to a digital image called a substitute check. The substitute check has a digital image of the front and back of the check and serves the same purpose and has the same legal standing as the original check. The information to generate the substitute check will then be transmitted electronically, rather than being trucked or flown across the country. If you need a copy of the check you will receive a substitute check.

Checks that took days to clear will now clear in hours. The old "float" grace period some of people relied upon for checks to clear will no longer exist. If you don't have the funds in the account before you write the check, it will bounce and you will have to pay NSF fees.

[Silverbug]

that sounds good, wonder how long before it comes out here.

[Brangwyn]

We already do it here actually Silver, i was involved in the project almost 6 years ago when it first started up, in NZ virtually every bank now uses Cheque Images rather than the physical paper.

Unless US Clearing is worse than I thought it was, the cheque clearing procedure will only be moderately streamlined, it's extremely unlikely chqs will clear in "hours". Banks still have to allow a sufficient period of time (recourse) to allow for dishonours. Here in NZ recourse is 24 hours, most banks will know a chq is legally cleared with 72 hours (though most continue despite these improvements to have a 5 day clearing period on MICR/Cheque transactions).

You may find banks slow to adopt Check 21 as well from what I've been reading

The law does not require banks to accept checks in electronic form nor does it require banks to use the new authority granted by the act to create substitute checks.

[generic]

I work closely with a lot of financial institutions, and they are all looking forward to this, they feel it will save $$.

From a law enforcement view, we are a bit more cautious though, just one more problem in the fight against check fraud. If we dont have an original check to produce at trial, then there is going to be a problem with prosecution.

[Brangwyn]

From a law enforcement view, we are a bit more cautious though, just one more problem in the fight against check fraud. If we dont have an original check to produce at trial, then there is going to be a problem with prosecution.

That was an initial concern here as well and did require some law changes to ensure the Image had as much legal standing as the physical piece of paper did (we destroy the paper here after a period of time can't remember the exact period now but its much less than the 7 years we used to keep all cheques).

I understand we're actually talking to some US banks regarding Image processing systems at the moment ... hmm wonder if I can snag me a trip overseas out of it

Cheque fraud will become less of an issue though as the banks pressure customers to stop using them, the trend over here is been one of increasing fees for cheques rather than the decrese in costs that you would have expected becuase of the introduction of cheque imaging systems. Though here in NZ we have one of the highest levels of eft-pos usage per capita of any other country in the world too and have had electronic clearing systems for over 40 years.

[Silverbug]

yeah i cant wait till they get sorted with eft-pos over the net as well (like you would with credit cards)

[generic]

yes, there still is the best evidence rule, and if they now destroy all the originals as a part of doing business, the copies will suffice, but fingerprint analysis and proving the check is counterfeit, i.e. color is off, no watermark, etc will be a bit more difficult.

[Brangwyn]

The fingerprint issue is really the one thing stopping us going to full truncation where the cheque is basically destroyed completely after its been imaged, but that will happen eventually I'm sure. Fortunately large scale high value cheque fraud isn't such a big thing in NZ, though of course banks don't want the crims knowing they are considering "destroying" the evidence either!

[Scroller]

this is what we have here as well ... if you bank in a cheque today before 2pm in any banks ... you can expect to see the money in your account by 12pm the next day.

[Brangwyn]

Here If you bank a cheque today before the banks close (4:30pm) it will show in your account tomorrow morning .. being cleared though is a little different, you may not be able to draw on those funds for upto 5 days.

[mresell]

Yeah, all our checks have been imaged here for along time. I find 24hrs. is about all it takes to show up for me. Now w/ amex they process extremely fast. Companies using their electronic systems to manage payable/recievable get to process really fast and track everything. If I pay amex the payment is immediately applied. I actually find the electronic processing is faster and more reliable. The mail system pretty much sucks.