[ smarm ]Early Out, why do you hate America? [ /smarm ]
I think many people here are confused about the original purpose of Check 21.
Right now, the law is that in order for a check to be processed, the physical paper itself must be transferred from one financial institution to the next. This was a problem after 9/11 when all the airplanes were grounded. Checks could not be paid for almost a week, since the planes weren’t carrying the checks around.
This is obviously an archaic way of doing things, since most monetary transactions nowadays are entirely electronic.
Check 21 changes this, so that an electronic representation of a check is acceptable for transferrring money.
It has nothing to do with Electronic Check Conversion, which is what happens when you hand a clerk a check and he uses it to immediately deduct the amount from your account, then hands back the now-void check.
For a full list of questions and answers, here is a page from the Federal Reserve Board itself:
http://www.federalreserve.gov/paymentsystems/truncation/faqs.htm
Ed
Um… what? Check 21 affects inter-bank processing. It doesn’t involve the merchants at all, unless a check they accepted is returned. The major banks will of course switch immediately, because the costs will be outweighed by the benefits, but this doesn’t involve the merchants in the least.
Some may be confused because in my initial post I mentioned that I wished my company would switch to electronic check conversion, but these two processes are completely unrelated.
Do US Congressmen still have the ability to kite checks? I remember the scandal a few years back…then Rep. Jim Torracelli (D. NJ) had about 21,000 $ in bad/kited checks…is this still going on?
Great post. Great link. Here are some highlights from the Fed’s FAQ: (Emphasis added.)
- What if I receive a substitute check representing a fraudulent original check?
Check law provides protections against fraudulent checks so that generally you are not responsible if you notify the bank in a timely fashion. This is the case whether you receive an original check, a substitute check, an image statement, or a line item on your account statement. If you receive a substitute check of a fraudulent original check, you may have additional rights under Check 21. Contact your bank for more information.
- If I suffer a loss related to a substitute check I received, can I file a claim with my bank?
Yes. If you have received a substitute check, you can file a special claim with your bank for a refund (called an “expedited recredit”) if you believe that
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The substitute check was incorrectly charged to your account,
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You lost money as a result of the substitute check being charged to your account, and
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You need the original check or a copy sufficient to show that the substitute check was incorrectly charged to your account.
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Does the special refund procedure apply if I receive an image statement with a picture of a substitute check but do not receive the actual substitute check?
No. The special refund procedure applies only if you actually received a substitute check.
However, check law protects you from improper check charges regardless of whether you receive an original check, substitute check, image statement, or a line item on your account statement. If you feel an error was made to your account, contact your bank immediately.
- How do I make a claim under the Check 21 refund procedure?
If you believe that you have suffered a loss relating to a substitute check that you received, you should contact your bank as soon as possible but no later than 40 days from when your bank mailed or delivered your account statement.
So if you support Check21 does that mean the terrorists have won? 
Actually, I’ll note that bad weather regularly led to increases in float due to delays in shipping all those paper checks, at least during the 1980s.
Still, it used to be a given that you could mail a bill payment a couple of days before you made a deposit. It’d take a day to reach the payee, and at least another day to clear.
In sum, though, I think the new system is a good thing. Unfortunately, I cannot rely on my bank’s electronic bill payment system, and have had numerous problems with it, including my phones once being cut off because my payment hadn’t been properly processed. Therefore we still have to write checks to pay the bills, and I hate having hundreds of dollars of paper outstanding on our checking account. The new clearing process should reduce the time the checks are outstanding.