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Check 21: New law ends checking traditions
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Recrediting your account
Check 21 protects you if there's a problem that can be traced to the creation of a substitute check. Perhaps there's been an incorrect charge on your statement because the dollar amount of your original check isn't readable on the substitute, or maybe your account is double-debited meaning the original check is deducted and the same amount is deducted again because of the substitute check. In either case, you'd have a right to an expedited recredit.

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Check 21 says the bank must either:

1) produce the original check or a copy that accurately represents the check and demonstrate that the charge is valid, or

2) recredit funds on the business day following the business day the bank finds the claim valid. If the bank cannot determine the validity by the 10th business day it must recredit the first $2,500 on the 10th day and the remainder by the 45th day.

Exceptions are made for "new accounts, repeated overdrafts and reasonable cause to believe that fraud is involved."

The problem, say some consumer advocates, is that the customer must have a substitute check in order to have the right to an expedited recredit.

"Some bankers argue that you lose your rights to get substitute checks when you agree to check imaging -- and with respect to getting substitute checks back (with your statement) yes, you did," says Gail Hillebrand, senior attorney at Consumers Union. "What's not clear is, can you still say to your bank that you need a particular substitute? It will be interesting to see if any banks say we don't have to give it to you."

Nessa Feddis, senior federal counsel at American Bankers Association, says a bank does not have to provide a substitute check to any customer, either upon request or with their statements. She emphasizes that copies and images have been accepted for many years as proof of payment by the IRS, landlords and merchants.

"The only difference for the consumers, if they do not receive an actual substitute check, is that they cannot insist, in the event of a dispute, that funds be recredited within 10 business days.

"That doesn't mean that banks don't and won't act quickly," Feddis says. "There are Uniform Commercial Code rules and potential liability that put pressure on them to respond quickly. In addition, there are customer-service pressures. Banks have a good track record of resolving disputes in a timely fashion."

Professor Budnitz, who specializes in consumer law, says a lot of consumers might disagree.

"We don't really know what will happen once Check 21 becomes operational," he says. "I don't think consumer groups are being unreasonable in having concerns. Most of the time financial institutions handle most consumer problems with dispatch and sensitivity, but I'm constantly getting calls from consumers and lawyers who represent them saying that they can't get the bank to sit down and listen to the problem the consumer is having.

"When there's a misunderstanding, when something gets messed up, the consumer just doesn't understand what went wrong. Banks will have a lot of discretion. They can make it easy or they can make it miserable."

Next: "We're member-centered. ..."
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