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
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.