Is there a new system where the business accepting your check clears it electronically, or does it still wait to be cleared until they drop off their deposits at the bank at the end of the day? This seems a little alarmist if it’s the latter.
Nice Consumer Reports link:
It will be more difficult to catch forgers:
Kiss your privacy goodbye:
Emphasis added.
In other words, if you claim that your signature was forged, or that the amount was changed, the bank will have to dig up the original, or pay your claim.
But there’s never been anything preventing banks from keeping track of the checks you’ve written. They’ve been keeping images of them for many, many years. There’s nothing in Check 21 that changes this.
Indeed. Every bank I’ve ever known images all checks as they enter the system when deposited.
The current order of operations is thus: (AFAIK – it’s been some years since I worked in the backend of the check process)
[ol][li]The checks enter the depository bank. They are imaged and then batched up to be forwarded[/li][li]The sorted checks are sent onward to the reserve bank for the district, which sorts them by issuing bank and sends them to these banks.[/li][li]The issuing bank debits the checkwriter’s account and posts a credit to the depository bank’s account at the reserve.[/li][li]The depository bank receives the funds from the reserve and posts them to the depositor’s account.[/ol][/li]Each of these steps can take a day, which is the source of the float. You write a check Monday, expecting it to post on Wednesday or Thursday. Check 21 is not a radical change to this process – All it does is replace steps 2 and 3. Instead of sending a paper check from depository to reserve to issuing, the depository bank transmits an image of the check (images that most banks already have, for internal recordkeeping) directly to the issuing bank, and in return the issuing bank transmits the funds to the depository bank. This collapses the float from 3 - 4 days to overnight.
Moral: Don’t write checks on funds that are not currently available. This has always been a bad idea, but it is now almost certain that you will get caught out if you do.
As a merchant, I’d rather we’d switch from check processing to an EFT system (in which a check is used solely as a source of information to immediately – at point-of-sale, like a debit card – transfer the funds from the account), but this is a step in the right direction. Anything that reduces the float time for us is a bonus.
First, I must admit that I basically did a cut/paste job above. Now then,
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I guess I don’t see any changes in privacy, given the points set out above. (Kudos to Early Out and Bambi. )
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— However, if there is a dispute about whether the check was properly paid which requires the original check to resolve, then the bank may have to locate the original check if it does not want to resolve the dispute in the consumer’s favor.
The word “may” indicates some ambiguity to me. We’ll see how it plays out in practice.
- ----- If the consumer needs the original check for any reason other than a dispute with the bank, Check 21 creates no right to get that original check.
I’m unclear about whether a forged check would always result in a dispute with the bank. If somebody steals your credit card, I understand that if you report it with sufficient speed, your liability is limited to $50.
What’s the deal with your checkbook? If somebody steals it, aren’t you liable for payment if you don’t cancel the checks in time? There may be cases where the original check would help catch the crook.
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Indeed, if checks clear faster, canceling them may become more difficult.
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Whining aside, I acknowledge that there are big big advantages to shortening check float time.
Yes, for the bank. But I don’t see any for us customers. It’s going to save the banks a whole lot of money. Do you seriously expect that this savings will be passed on to us consumers?
Check21 simply validates the technology that has been in use for 10+ years. I have done quite a bit of DP/MIS/IS/IT work for banks over the years.
Any check drawn on a US bank, and deposited in a US bank has cleared (electronically) within 24 hours since the 80’s, most clear in no more than 4 hours.
Banks love float games - the regs allow them to collect money and keep it for up to 5 days - that is known as ‘free money’, and it is a significant chunk of change for the banks.
Remember getting your paper checks returned with your monthly statement? The rule used to be that you needed a signed piece of paper to confirm, in the eyes of the law, the transaction. That was the slow part of the process - the Fed is the ACH (Account Clearing House) through which checks are distributed - that was the origin of the 5-day rule - to allow enough time to process the paper.
In the late 80’s came the imaging technology - you now get a picture of your check in the statement. That image is transmitted electronically - some banks actually destroy the physical check - that was a gray area - Check21 settles the question, making it impossible to nail the bank because they destroyed the physical evidence.
As to item posting:
the sequence has long been first post the debits, highest amount first (after which you check for a balance below the minimum required for account), then you post credits (lowest first, to maximize bounce charges), then you post any bounce charges you can get as a result of the debits. Most banks have a limit as to how many times they ding an account for bounce in one day. Play with the numbers, see how many combinations of highest debit, then lowest credit you can find in any sequence of postings.
I once saw an item posted to an account which had an $18 ‘per-check’ charge. They charged the sucker $18 to to write that check - no, it was not a ‘wire transfer’ for which a bank charges $30 (it is actually cheaper for them to process than a paper check - they don’t have to handle the paper) nor was it a particularlly large amount - the transaction did not break down the components of the charge, so I don’t know why the charge was assessed (it was not an overdraft). For some reason, the account (a small business account) had a balance of only around $2,000 - I wonder where its money was going…
Incidental to the topic, all (savvy) companies float funds in one way or another. Say that XYZ, Inc is billed for goods with terms of 2-10-30. That means that they can deduct 2% from the invoice subtotal before freight if they pay within 10 days, or else must pay the full invoice within 30 days. Most companies will process the invoice so that they officially receive it 10 days from a Saturday. They will then meter the mail on Friday, and take it to the post office on Monday.
Are the banks obligated to pass the savings on? Are we consumers benefitting now from the costs the banks are trying to avoid?
The “Golden Rule” is: “He who has the gold, rules.”
I happen to believe the banking industry rules this country, not the politicians in Washington. That’s because, in 1971 their friend, Richard Nixon, opened the gold window (sold most of the gold), put the dollar completely on the float ( i.e., it is no longer backed by anything but a promise to pay from the government), and in doing this, handed over complete control of the money supply to the Federal Reserve. The Federal Reserve, contrary to what most of the ignorant American public believes, is not a government agency. It is a privately held corporation, owned and controlled by a handful of huge international banking consortiums, which are owned and controlled by an even smaller group of powerful families (e.g., the Rockefellers, Rothchilds, et. al.)
Therefore it isn’t surprising that one can no longer find a bank in this country that isn’t a FED member (This wasn’t the case before 1971.), which means there is, really, no competition amoung banks–they’re just a huge monopoly run by the FED. Therefore, they make the rules, and if we don’t like those rules, well, we can go back to using our piggy banks.
Depends on who you ask. Are you going to see credit on your statement labelled “refund for reduced cost of transaction processing”? I really doubt it.
Some would say that the savings will be passed on to customers in the form of lower-than-it-would-have-been-without-this-law fees, others will say it just maximizes bank revenue.
With which side do you agree?
(shrug) do not worry about things over which you have no control.
Maybe you have enough money to buy a bank and get in on the action? There are many countries with very loose banking regs - but they charge for that convenience.
Cite?
Here’s what the Fed has to say about it:
[hijack]Of course, milroyj that’s what they want you to think.[/hijack]
The direct beneficiaries of reduced float include those who receive check payments (on net). These include merchants large and small, from the grocery store to the telephone company. The advantage for each transaction is small, but given that billions are processed weekly (WAG), the sum doesn’t sound trivial.
Those who experience reduced float due to passage of the bill are losers. I think that this would include banks.
Of course the banks gain disproportionately from reduced processing charges. Some of that will eventually be passed on to the consumer and the banks’ advertising departments (does anybody really believe that bank profit rates will permanently increment upwards?), but frankly I wasn’ t really thinking about these sorts of costs.
I hope it’s obvious that I haven’t studied this in any sort of detail.
I’m still wondering whether this law opens up opportunities for fraudsters.
WTF? The entry “periodic transactions of identical amounts” is a textbook description of Joe Sixpack’s paycheck – that’s now some kind of red flag?
Everytime I give a check to a Books-A-Million clerk s/he runs it thru a reader and gets the money from my account instantly. It prints a whole lot of text on the back then s/he gives the check back to me. I don’t even have to fill it out or sign it, just remember not to write it to someone else later. I might as well have used my debit card and probably should have, and stop carrying my checkbook, assuming I carry a separate record of my current balance. Oh the humanity!
I used to be an editor for a regional banking publication back in the 80s. They had articles on why they charged so much for overdrawn checks. It’s called “fee income.” They really don’t give a fuck about the legality of it, except to the extent that it forms a rationale for charging $29 for paperwork that costs a buck or two to process. The huge majority, and I mean 99 percent plus, of people who write rubber checks aren’t the career criminals jsgoddess seems to think they are, they’re ordinary folks who’ve either screwed up their math or tried to stretch their checks for a day or two longer than they really should have, who’ll cover the overdraft on their next paycheck, including the $29 fee. The bankers love this, especially the way all the suckers feel guility about giving them a rationale to charge them out the wazoo. It’s easy money for them, and the word for people who think it’s not a scam is “gullible.”
Your solution amounts to “Have more money.” I’m all for it. Will you give it to me, Liberal?
No. And I won’t spend it for you either. Although your post deserves a Pitting, I won’t invest the time. Suffice it to say that I wasted too many years of my own life in the same sort of reality haze in which you find yourself. In the days when I mooched off others and abused the Crisis Assistance Ministry, I felt that the problem was that I didn’t have enough money. And I thought that other people did. I thought that if I had some of theirs, I’d be better off. It’s like an obese person thinking all his problems would be solved if only he had more food, and others had less.
It’s matched transactions going both ways. So unless Joe Sixpack is in the habit of writing a check for the exact amount of his paycheck shortly after it deposits, he should be fine. It’s also unlikely Joe Sixpack’s paycheck is written off a personal account.