|Check 21: New law ends checking
"WAMU (will) simply accept substitute checks,"
says Washington Mutual spokeswoman Lisa Margolin-Feher. "We're
taking a more deliberate approach. We anticipate that we'll be evaluating
where this goes and determine when the next step is appropriate."
Bank of America will also take its time, according to spokeswoman
"We'll begin exchanging a limited volume of check
images after it goes into effect. We'll do some imaging, but only
to a limited degree. Ultimate adoption of image exchange is a full
build-out of systems and processes that could take the industry
and Bank of America a matter of years."
What this means is that customers who have their canceled
checks returned with their statements can expect to see a mix of
substitute and original checks with the substitutes just trickling
in at the beginning.
That leads us to one of several hot-button issues
surrounding Check 21: returned paper checks.
The ABA estimates that 64 percent of checking account customers
do not get their canceled checks returned with their statement.
Those customers have opted for truncation, or "safekeeping."
Their bank keeps the original and gives it to the customer only
when requested. Banking industry representatives say those customers
will likely not see any difference under Check 21 until they request
a check and instead receive a substitute or an image. The bank or
credit union will include an explanation of Check 21 in those situations.
A sticking point with consumer advocates is that the
36 percent of customers who didn't agree to safekeeping will now
have to accept an imitation, says Mark Budnitz, a law professor
at Georgia State University College of Law.
"With Check 21, Congress imposed something on
consumers. Consumers who said they wanted to get their original
checks back didn't agree to truncation. That was an agreement these
customers had with their banks. Now Congress says, 'We don't care.
Take a substitute check instead.'"
Deflating the float
If you keep enough money in your account to cover the checks you
write, you probably don't care about float. But banks rake in enormous
amounts of money every year in bounced-check fees indicating that
there are plenty of people living close to the edge with their checking
Check 21 will significantly reduce the float -- the
amount of time that lapses from when your utility company receives
your check to when your bank receives the check and debits your
"The float won't disappear," ABA's Hall
says. "For local checks the float is about 24 hours today.
That will remain the same. The big one will be nonlocal checks.
For out-of-town checks you will notice that rather than the current
two- to three-day float, it will clear in 24 hours if the bank uses
Keep in mind that the banking industry does not include
the time a check is in the mail when it calculates float. Float
begins when the check arrives, for example, at the utility company
and ends when it shows up at your bank and is deducted from your
Also, Check 21 does nothing to shorten so-called check-hold
periods -- the amount of time that an institution can hold checks
you deposit before crediting your account. John Hall says the issue
is being studied to see if changes are warranted, but, he says,
many banks make funds available faster than the rules require.