By Tim Pennington
As the Check Clearing for the 21st Century Act - Check 21 for short - takes effect today, bank customers will notice two changes. Smaller digital copies in their monthly statements could replace their original checks, and their checks will clear much faster.
But for David Van Horn, president of Citizens Bank of Northern Kentucky, it will be just another day at the office.
His bank has been replacing the original checks with copies for almost five years now with no problem, he said. "We were told back then that customers wouldn't go for not getting their original checks back, and that was just plain wrong."
With ATMs allowing customers to check account balances nearly everywhere, and Internet banking becoming widespread, most people enjoy less clutter in their monthly statements, Van Horn said.
"I don't think this will have a great impact on people," he said. "It's a new way of doing business, which isn't always bad."
But consumer groups claim that the new law, which allows banks to replace canceled checks with digital copies, will hurt customers in the long run with higher fees and more inconvenience.
"We are hearing from consumers who are unhappy that they won't be able to get back their original checks after Check 21 goes into effect," said Jean Ann Fox, director of consumer protection for Consumers Union, the nonprofit publisher of Consumer Reports magazine.
Fox said the faster withdrawal of money from checking accounts with the new system will cause more bounced checks as consumers "float" payments while their deposited paychecks clear the banking system.
She also said banks will charge higher fees when consumers need to get official copies of certain checks to prove they made purchases.
Consumers Union in August asked all financial institutions to adopt seven policies to mitigate the adverse impacts on consumers of Check 21. Among them was to promise to return funds to a consumer checking account within 10 business days when something goes wrong with a check, to not charge a fee for a substitute check and to suspend bounced-check charges until Jan. 1.
"The financial institutions could make Check 21 less disruptive for consumers by adopting pro-consumer policies," Fox said. "These policies would avoid using Check 21 as a new opportunity for fees."
Nessa Feddis, senior federal counsel for the American Bankers Association, said concerns by consumer groups are unfounded.
"Many of (their) suggestions and concerns assume that check processing will suddenly and quite completely convert to a substitute-check environment, as though with the flip of a switch," Feddis said.
"The changes Check 21 will bring will be gradual over the course of a number of years. Check 21 does not require banks to send or accept checks electronically, and many will not be doing so until many months or even years after (today)."
About Check 21
Question: What is Check 21?
The Check Clearing for the 21st Century Act allows banks to provide "substitute" checks to customers, essentially digital-printed paper copies of cashed checks instead of the originals.
Q: When will Check 21 take effect?
The act is effective today.
Q: Are "substitute" checks an acceptable proof of payment?
Yes. Beginning today, digital copies of cashed checks by law must be accepted as proof of payment.
Q: What is a substitute check?
A "substitute check" is a digital copy of your original check - both front and back, with all endorsements - and is about the size of a business check. Check 21 legislation sets standards for quality.
Q: How will Check 21 affect consumers?
If you receive canceled checks with your statement, you may receive a mix of "substitute" checks and original checks, depending on your bank's policies..
Check processing is expected to be faster with the implementation of Check 21. Funds may be removed from your account sooner than in today's system, therefore there will be less "float time."
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