By Tim Pennington
Enquirer contributor

Consumers may notice their monthly bank statements are considerably lighter now that banks no longer have to return paper checks but instead can return digital images or substitute versions of the checks.

Starting Oct. 28, "Check 21," or the Check Clearing for the 21st Century Act, changes the way banks process checks, including allowing them to substitute the canceled checks with digital images of up to 12 checks on a single sheet of paper in returning them to customers.

"We do not feel that customers will experience that much of a change," said Robbie Jennings, spokeswoman for Cincinnati-based Fifth Third Bank. "We already have some customers who request we don't return checks to them, and they enjoy the less clutter."

John Hall, spokesman for the American Bankers Association, said only 36 percent of consumers now get their canceled checks returned to them. Most prefer the digital images or nothing at all.

"Historically, credit unions have never returned checks, and this has proven to be an efficient way of doing business," Hall said. "It's like the Pony Express meets the computer era."

The "substitute check" that may come in monthly statements is a paper copy of the digital image of the original check - both front and back, with all endorsements. Check 21 legislation sets standards for quality and allows for substitute checks to be legal copies of the originals. All banks must accept the substitute check from other banks as they would the original document.

Consumers will certainly notice that checks will clear much faster than before because all transactions will be electronic, Hall said.

Consumer groups warn that Check 21 may cost bank customers more money through additional fees if they "float" a check and it bounces or if they want a copy of a substitute check.

"There are several negatives to consumers that come with this new law, and the biggest ones are the higher fees some customers may have to pay," said Gail Hillebrand, senior attorney for Consumers Union, the nonprofit group that publishes Consumer Reports magazine.

Speed and convenience

TIPS FOR THE SYSTEM

Gail Hillebrand, attorney for Consumers Union, offers these tips for Check 21: Don't sign up now for voluntary non-return of your checks. You have even fewer consumer rights under voluntary non-return of your checks than you'll have under Check 21. Decline invitations from your bank to convert to voluntary check truncation. Ask for a recredit in writing. If something goes wrong with your checking account, make a written request that your bank "recredit" (return) the funds to your account. You have a right to recredit only if you have insisted on continuing to get paper checks. You should ask, in writing, for a recredit whenever a check is paid twice, a check is paid for the wrong amount, or something else goes wrong with your checking account. Ask for a substitute check. You get a limited recredit right under Check 21, but the regulations restrict recredit to consumers who were provided with a substitute check. Always ask for a substitute check, which is a special kind of copy of your paper check. If you now get your original checks back, ask for an account that returns substitute checks every month. If your bank charges too much for an account that returns substitute checks every month, look for another bank. Source: Consumers Union. For more information, visit: www.consumersunion.org. Or the National Consumer Law Center at www.consumerlaw.org

Check 21 was created by Congress to reduce the time, risks and costs associated with paper check processing. Currently, checks travel on trains, planes and automobiles during the clearing process. Just after the Sept. 11, 2001, terrorist attacks, the banking industry was slowed to a crawl as planes were stranded and checks could not be returned to their original banks for processing.

"Checks written locally usually clear within 24 hours, and most consumers have gotten used to that speed over the years," Hall said. "What will change is that checks written to out-of-state vendors, such as monthly payments, will clear much faster than before when the check had to come back to the bank. Consumers should be prepared for that."

Translation: Checks will clear sooner, increasing the risk that a check will bounce if funds are not in the account when the check is written.

"People who write checks before their deposited money has cleared the bank - which they should not be doing but they do - may be hit with additional bounced-checks fees," said Hillebrand.

"And then there is the question of going back later to try to get a copy of a check. The banks haven't been real clear on how they will charge consumers for those services."

And, she says, banks will not be required to make money deposited by customers into their accounts available any faster, even though the process for clearing those checks will speed up, too.

"The timelines for making money available to consumers will not increase with Check 21," she said. "That means money will come out of customers' bank accounts faster than it goes in, and that could be a huge problem for some people."

Educating customers

Local banks and financial institutions will soon begin the process of educating its customers about the option of not getting their checks returned.

Jo Brotherton of Miami Township in Clermont County said she isn't worried about the new regulations because the computer age allows her to check her balances online every day.

"I don't write a check unless I know the money is in the bank," she said. "Years ago it was a problem trying to guess how much is in the account, but not any more. You shouldn't be floating checks to begin with."

Chris Kemper, spokesman for Provident/National City Bank, said his company will put information in branches and mail brochures in monthly statements for customers to review.

"We'll also be educating our staff internally about the new regulations and procedures so they help answer any question customers may have," Kemper said.

Hillebrand encourages consumers to examine their bank statements more closely when Check 21 takes effect, cautioning that bank errors can be made when the institution makes electronic deductions more than once on a single transaction. She said Check 21 includes provisions for consumers to get their money back within 10 days if errors do occur.

"Consumers need to look at their statements better than ever because of the risk of error and the fact that banks might try to slip in some additional fees," Hillebrand said.

"If new fees come out of this new law, then consumers should shop around for a bank that won't hit them with unnecessary fees."

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E-mail timpennington@fuse.net