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How Check 21 Affects You
By: John Thomson
The Check 21 Law is the new federal law for financial institutions and has taken
effect last October 28, 2004.
Before the Check 21 law was enacted, your paper check had to be physically
transported from where the check was paid out before it could be deposited to
the financial institution. Now, even if it has always been prudent for you to
keep money in your account to pay for the checks you’ve issued, this law makes
it imperative.
Here are some of the other effects The Check 21 Law will have on you and fellow
consumers.
You will no longer receive the original paper checks you issued, as your bank
won’t have these.
The probabilities of your checks clearing sooner have increased. If you don’t
have funds to cover this amount, your check will bounce. So don’t make out a
check when your checking account has insufficient funds, you’ll be severely
penalized.
On the minus side is, you will not be able to access the funds you’ve issued a
check for, as the new law doesn’t include shorter check hold times.
Because of the shorter time in process the checks, your banks will be able to
save money in processing your checks, but they are not required under the law to
share these savings with you.
For each kind of copy, your check will have different rights attached with it.
For instance, Check 21 has created a new paper copy of an electronic image of a
check and is called the "substitute check." This substitute check can be a legal
equivalent of the original check, and right attached to this, is that only a
substitute check triggers your right to recredit of disputed funds.
The regular copy of a check does not have this same kind of protection. If you
ask for a copy of a check, your bank can send you an ordinary copy instead of
this special kind of copy which triggers legal rights and protections unless you
specifically ask for the substitute check.
A second bank other than your issuing bank can have your original check and
under this law, has the right to decide if it will keep or destroy your check.
Before enactment of Check 21, your own bank could decide how long they should
keep your original checks, if you didn't get these back together with your
monthly statements. Under Check 21, the bank of the person you wrote the check
to may decide when to destroy your check.
Under the Check 21 law, you can have funds of up to $2,500 recredited to the
your account in 10 business days if the check is paid twice, paid for the wrong
amount, or otherwise paid in error. However, a gray area exists, does this new
right apply when a paper substitute check is used in the processing of the check
but is not returned to the consumer? The regulations apply this recredit right
only to the consumer who was provided with a substitute check. If the check was
electronically processed by all the banks it was routed through, and the
consumer was not provided with a substitute check, then the check remains under
state check law.
If you want to safeguard your rights, you can request for a return of
“substitute checks" you issued together with your monthly checking account
statements. One possible difficulty lies in the amount you may pay in getting
these checks back, change banks if these are too high!
In essence, what the Check 21 federal law has done is shorten the gap financial
institutions take in processing checks. This new law has enabled financial
institutions to scan paper checks and to send images of these same checks for
electronic processing. This law is an efficient and faster way to process check
payments.
If you need information that is more detailed about your rights on the Check 21
law, access the Federal Reserve Bank website and request for these materials:
Consumer Guide to Check 21 & Substitute Checks and what you should know about
your checks.
About the Author:
John Thomson is webmaster at http://www.business-personal-checks.com where check
information is a click away. Easily find the checks for you at http://www.business-personal-checks.com
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