|Check 21: New law ends checking
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.
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,
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
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
"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
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."