Oct 272004
Authors: Ryan Riggen

Students may want to think twice about writing a check before

they have the cash in the bank to back it up.

Today marks the beginning of Check 21, a banking law that makes

check clear in a matter of hours instead of days. Consumers will

receive very few, if any, canceled paper checks in the mail after

this law takes effect.

The Consumers’ Union is worried that this will cause a rise in

fees placed on consumers. Overdraft fees and bounced check fees

could possibly rise if consumers are not careful when writing


“Check 21 will increase the likelihood of bounced checks,” said

Michael McCauley, media director of Consumers’ Union. “People who

pay on the ‘float,’ assuming checks will take a few days to clear

will find it may take only a few hours rather than a few days.

(Checks) are becoming more and more like debit cards.”

McCauley said that although checks may clear faster, banks are

not required to speed up the time when they make funds available

from checks people deposit. McCauley said the best way to ensure

funds are in the account quickly is to use direct deposit.

Trish Joyner, business development manager for Norlarco Credit

Union, 2503 Research Blvd., said Check 21 was created in Congress

as a bi-partisan effort after Sept. 11, 2001.

“The transition period will depend on the person,” Joyner said.

“To some it won’t make any difference. We are encouraging

‘floaters’ to add overdraft protection until they get used to


According to the Federal Reserve Board, the law allows checks to

go through faster by creating a new negotiable instrument called a

substitute check, which would permit banks to process check

information electronically and deliver substitute checks to banks

that want to continue receiving paper checks.

A substitute check would be the legal equivalent of the original

check and would include all the information contained on the

original check.

These substitute checks can be requested from the bank if there

is a problem such as a payment in the wrong amount or money being

deducted twice. Those who receive canceled checks from their banks

by mail can request an account that returns substitute checks every


“Banks may charge for substitute checks,” McCauley said. “There

are no set rules; it is left open to the bank to decide.”

Joyner said Norlarco does not provide canceled copies of checks

to current customers, so the substitute checks will not make much

of a difference. She said members can view copies of their checks


Larry Costello, area retail leader for KeyBank in Northern

Colorado, said there probably will not be many problems when the

new law takes effect today.

“I can’t imagine there will be any problem,” Costello said.

“National banks have the resources to implement this smoothly.

Smaller banks may be a little slower.”

Costello said KeyBank sent letters out to customers to inform

them of the changing law and that other banks likely did the


“Basically this is bringing check writing into the 21st

century,” Costello said.

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