No more cancelled checks

“FYI: (from the everyday cheapskate):

Check-writers be prepared for 'Check 21'

A sweeping new federal law nicknamed "Check 21" takes effect on Oct. 28, 2004. This law will change the way your checking account works, giving digital copies of checks the same validity as paper ones. You may hear about this law from your bank, or, due to loopholes, you may never hear about its resulting impact. But you definitely want to be up to speed on the upcoming changes.

Here's a rundown of the important changes that will result from "Check 21."

NO MORE FLOAT: The "float" is the time between when you write a check and when the money is taken out of your account. Say goodbye to the float, forever. This law allows your check to be handled electronically once it has been received, just like a debit card payment. You dare not write a check unless you have the full amount in your account the moment you sign your name -- that is how fast the check will be processed. You cannot afford to be socked with big overdraft or bounce fees.

NO MORE STOP PAYMENTS: Remember the good old days when you could stop payment on a check because you changed your mind or the service was unacceptable? Well, you can kiss those days goodbye as well. You will no longer have the luxury of time to change your mind.

NO MORE CANCELLED CHECKS: You won't be able to get your original paper checks back because your bank will not have them. Your paper checks are digitally copied to create a "substitute check" and then destroyed the moment they are accepted as electronic transactions. Cancelled checks for proof of payment or to fight a forgery are a thing of the past. You want to make sure your bank sends you copies of your substitute checks, which will be legal proof of payment. Watch out for fees associated with a substitute-check-returning account. Look for another bank if your bank charges a high fee to get copies of all your checks as substitute checks.

DEPOSITS STILL ON HOLD: Just because your checks will clear faster doesn't mean your deposits will be available to you any sooner. The new law does not shorten check hold times.

WATCH YOUR ACCOUNT: The possibility exists that a check can be turned into an electronic transaction with a "substitute check" and then the original paper check is not destroyed, allowing it to make the rounds and be credited against your account a second time! Now more than ever it is important that you keep an eye on your account for such errors. If you spot an error or fraud the bank must put the money back into your account within 10 business days, but only if you have not waived your rights to have "substitute" checks provided to you.

DON'T SIGN UP FOR VOLUNTARY CHECK TRUNCATION: You bank may ask you to agree to "voluntary check truncation." This means you give up your rights to have copies of your substitute checks returned to you. The Consumers Union warns us that we will have even fewer consumer rights under voluntary non-return of our checks than we will have under the full provisions of Check 21. For this reason they recommend that we decline invitations from our banks to convert to "voluntary check truncation."

While I've only summarized portions of Check 21 for this article, you owe it to yourself to learn as much as you can about how this law will affect you. You can learn more about Check 21 and its provisions at the Consumers Union Web site at www.consumersunion.org and the American Bankers Association's "Check 21 Resource Center" (www.aba.com).”

“My bank has been giving me back copies of "substitute checks" for several statements now. They take up less space but I guess it will be a little tougher at tax time. I'm fine with it.”

“PedXing-
Thanks for the heads up. There have been many times when I have counted on that window of time between writing the check and actually having it be cashed...”

“shoot, who doesn't!

but I've been getting images instead of checks for a while now. I never really look at my paper statements anyway, i keep up with the account online and look at images when I need to.

Is this rule going to apply to businesses too? I assume it is.”

“I've never had a bank that sent me cancelled checks anyways, or even copies of any sort, so it don't 'fect me none.”

“I actually have been paying electronically for years. I am paid electronically. I like it. The ONLY place that I had a great deal of difficulty with was the NYS Education Dept in Albany. You better pay them with a money order & get a receipt. They didn't accept electronic payment so my credit union sent them a paper check. They notified me that they didn't receive payment. My credit union cancelled the first check & sent them a replacement check. Lic issued. Later, they FOUND the first check & charged me $25 for stopping payment. I advised them that they claimed that they never received it. Said I couldn't stop payment even though they claimed they never received it. Cost me $25. They are bureaucratic morons.”

“Thanks for the heads up Ped! I guess no more grocery shopping the night before payday. =(”

“Hey! Maybe we can apply this to the spend, spend, spend republican party!”

“NO checks and balances?”

“It's just not right to talk about paper Czechs!”

“Who uses checks anymore? I mean, besides for rent?”

“I've never had a bank that sent me cancelled checks anyways, or even copies of any sort, so it don't 'fect me none."
Bison
06:33:45 AM
10/06/04

I have never been with a bank that didn't send me back my checks or copies of my checks.

Just curious, what do you do when it is time to file taxes and you have no copies of checks to show for deductions.”

“I pay most of my bills by check and that's about it.”

“Deductions? What are deductions?

I pay most bills by debit card, automatic withdrawal, computer transactions.”

“And a bank statement can show a major deduction, no?”

“bm, when I was married we had lots of deductions esp with 2 kids. So how would you show those deductions if you didn't have cancelled checks or copies.”

“a bank statement doesn't say what it was for!! It just shows you wrote a check for something.”

“I pay by check at the discount warehouse store named BJ's ever since both my wife and I had our debit cards compromised. The short version of the story is that BJ's did not properly protect their systems and someone stole card numbers stored there.

Neither of us lost any money in the deal, it was just a huge hassle. If there were another discount warehouse store in the area, I would stop using BJ's. Right now, BJ's is the only game in town.”

“My bank has electronic copies of all my checks. I can access these online.”

“I don't "float" anyway, so I don't care about that.

I've haven't seen an actual paycheck for about 20 years. My house payment has been made electronically for as long...and as soon as I could, I started paying my bills electronically.
For the checks I do write, I haven't rec'd paper copies for years - don't want them either.

My tax refund and any other check I might receive from my employer are direct deposit as well.
I love it!

One thing about direct deposit of my paycheck, the money is there the night before I get paid.”

“I wish I had my paycheck direct deposited. The system doesn't work too well for small businesses though.”

“I like getting my paycheck handed to me. I can use online banking but haven't yet. I am sure I will eventually. Now I do use my checkcard a lot. just have to remember to write it down.


I can't wait for my ex to have her checks bounce. She is really bad about floating checks.”

“I still get my check stub handed to me...

The one problem I run into occassionally is that I rarely have cash on me...

What kind of deductions do you get for kids, Ewker?”

“Write what down, Ewker? ;)”

“write down the amount I spent in my checkbook..remember those things BM”

“twiggy, college cost, medicial expenses and any other things I can think of”

“College costs?
I've never had enough medical to claim anyway, and the years I had a kid on my return, I was poor and got back more $$ than if I'd itemized. :)
I itemize now, but I get the numbers off my vehicle registration, my tax bill, stuff like that...I wouldn't think I'd need check stubs unless I was audited...”

“So Check 21 is a good thing right?

I don't see a down side.”

“I work for a bank, in fact, it's one of the largest banks in the good ol US of A.

The only reason for the Check 21 law was to give "digital checks" the same validity of regular checks. By no means does this law mean you can't write physical checks. So don't cry, you can still write all the checks your heart desires.

In the next few years everyone is going to see a push toward digital statements, online bill pay, and digital checks. Statement processing centers are expensive. At my facility we have nearly 20 inserters which cost $2 million each. Inserters are machines that send you your bank statements and checks. In addition we have 10 $1 million printers to print the material. At any moment we have almost $2 million in postage sitting in our account. Three shifts of operators (1.5 per machine) plus print operators, plus programmers such as myself, plus managers, etc...all this paper equal a HUGE cost.

Digital checks and statements reduce this cost. When you pay a bill online one of two things happen...if it's a big company like AEP or Columbia Gas then the money gets transferred electronically to their account through our bank. If they're not big or don't have an account then a check gets queued for printing, is printed, cut, inserted, stamped with a third class rate metered mail stamp, presorted, and sent to the payee. (i.e. $$$).

Many companies are setting up accounts with all of the major banks. For instance, the AEP and CG accounts...when you pay your bill in my area it doesn't go to AEP or CG...it comes to my bank in a pretty AEP or CG envelope, then goes upstairs to an Olympus II mailsorter (another million dollar machine with operators). After they are sorted the checks are opened and processed (more mail!). But with accounts and digital checks there is no paper trail, there is no mess, the money is transferred automatically. Paper usage is reduced, cost is reduced.

So the bottom line is dollars and cents (what else would it be with a bank?). Digital checks save money, save trees, save other resources such as the enormous electricity used by inserters, and they lighten the load on the post office.

A digital check is just as valid as a physical check thanks to the new bill. You can print them on your computer if you need a copy or you can ask your bank (like us) to send you copies printed on paper (8 per page, front and back). Even if you have us do that it's less paper, less mail, less work, and just as useful.

This is just a brief overview into the mystical world of online banking...I'll be glad to tell you more about it on the trail.”

“Oh and BTW, you CAN stop payment on one of OUR online checks. We take 2 days to process the request on purpose and five days if we have to print a check and mail it.”

“And I think this law was passed because commerce hit a major clusterF*** when all planes were grounded on 9/11. Thousands (millions?) of "cashed" checks sat on planes and could not be processed b/c the banks needed the physical check.”

“Like I said...with banks its all about dollars and cents...they get their money faster with digital checks and they save money by reducing the workforce, etc. Plus when you initiate the check we get to take the money out of your account and earn interest on it until your payee recieves it.”

“What about people who don't have internet access? There is still a large population of people in this country that don't own or have access to a computer.”

“Accounts that don't use online bill pay/check writing will be charged a no usage fee of $3-5 a month.”

“Will they still get copies of their writen checks and bank statements mailed to them?”

“They haven't decided if they are going to charge for statements or not. What will most likely happen is all new "free" accounts will require online usage only. "Upgraded" accounts will have statements sent to you for $3/mo with scanned copies of checks. Traditional accounts will most likely not be affected, it will just be new accounts. Of course they'll send you the offer "sign up for online statements and receieve $5 in your account" or something like that to persuade you away from it and if you go back after the grace period they will charge you.


At our facility returning physical checks is the most costly of all statement processing. The machines that do checks are special and slow (an output of around 5,000 letters an hour vs 22,000 with checks that are scanned and printed on paper). So the customers that have thier checks returned cost us the most money in time, equipment, postage, etc.”

“twiggy, yes college cost. As long as we claimed the kids we got to deduct college tuition. The amount dropped we got to claim dropped each yr. Also teachers can deduct expenses they paid out of their own pocket. A teacher buys a lot of material for kids in elementary school. We had to have cancelled checks for all of that.”

“I guess I never had enuff tuition to worry about anyway...

These days kids are required to bring the supplies they need to school.”

“Well when I first saw this thread I was a bit skeptical to put in my $.02 since after all this is what I do. I'm a Consultant for the Banking Industry and I specialize in check processing. I work with all the big guys....B of A, Bank One, US Bank, etc. I've been a part of the banking world since 1977.

This whole mess with Check21 started with 911...isn't that a surprise. The government found out when 911 occured, they had to shut down commercial air traffic but that would also halt the clearing of millions of dollars in the form of checks. Checks sat on the ground for a few days and in some cases a week or more. The smart banks hired ground couriers and hauled the large dollar items to where they needed to go. Afterall checks need to get to the paying bank and they do this by taking an airplane ride every night.

Well some so called geniuses, politicians, bankers, etc, came up with this grand idea of Check21. So if we ever experience a 911 again we'll have processes in place to circumvent the disaster. Let's just hope a 911 event doesn't happen again.

The Check21 topic can be discussed on and on but the real outcome to this new law is ultimately the ability for banks to clear checks by way of a digital image...which will occur within the next 5 years.

What does that means to the consumer? Well not much other than there will be some instances of accounts being overdrawn. The consumer will eventually alter their behaviour and replenish their accounts sooner than what they do today. As a matter of fact the Consumers Union feels that by mid '05 consumers will bounce nearly 7 million more checks and....here's where the revenue comes in....they'll pay $170 million in fees each month! Wow! That's great...for banks that is...let's see....170 times 12 = $2 billion annually. Well the consumer will adapt and that number will disolve by '06. A short lived revenue stream.

The "substitute check"....well we don't expect this to be something that lasts very long. It will primarily aid the West Coast banks. The principle here is simple. West Coast banks are always fighting time. They have East Coast deadlines to meet which are generally twofold....for sake of argument.....1 at midnight and the other somewhere around 8am. When their shops get really going...they're already several hours behind. Today....they dispatch as much as they can somewhere in the neighborhood of 5pm to meet the early deadlines east. Well with Check21...they can dispatch a few hours later but in the form of digital images. What they'll do is establish a "print site" on the East Coast (at least somewhere east of the Mississippi). Then say....around 11pm send a transmission to the East Coast "print shop"....then..."substitute checks" will be printed and then a ground courier will deliver them to the paying bank. This allows the West Coast banks 6 additional hours of processing...hence the ability clear more dollars the "same day" rather than "next day".

I think that kind of raps up lesson 1 on Check21....

Lesson 2....well....stay tuned....”

“I think the changes make sense. I'm sure there will be a few rough patches at first - and some people will get caught trying to "float" (especially people who don't read the info pamphlets banks send out with their statements). Forewarned is forearmed.”

“9/11 is just a cover, an excuse. It's all about the bank making more money. With digital checks they get to take the money out of your account sooner, there is less paper and a need for statement processing centers, check returns, yadda yadda yadda. $$$$$$$. I know these things because I write the software that makes it happen, I can actually see the billions of extra dollars the bank will save and make with small changes. I work for a bank larger than any Ped mentioned. However, I have only been in this industry since Aug 1.”

“Everything a bank does is all about making money but you are dead wrong about 911. It caused a ton of havok to banking. You might want to consider listening to those who were actually in the banking industry during the 911 mess and saw what happened.

So Dub, you at Citigroup?
I am.”

“Nope, not Citigroup but I have been to their location in Columbus and know several people that work there...our site will be modeled after theirs eventually. Nice setup they have, almost everything is streamlined and automated. And I'm sure 9/11 did cause some havoc, but it's not the sole reason for online/digital banking...it's all about costs. 9/11 probably hit the banks hard...but it shouldn't be used as the sole excuse since online banking will reduce so many other costs.
last edited: 10/07/04 1:07:19 AM”

“Just asked my boss for some clarification...cancelled checks will be available at a fee or if you are an important enough customer, otherwise you can get printed copies of your checks instead of the actual checks, download the images yourself and print them, etc.

There will still be a float time on physical checks. When you write a check for a bill and mail it you still have the time while the check is in the mail plus processing time at the bank which will generally be 24-48 hours after recieving the check (upon which time it is scanned and digitally transferred across the bank networks). You will not have the extended float time where a check received by a CA bank from an account in Ohio has to travel across the country--gone. All the checks recieved at my bank will be shredded after processing unless like I said you pay to keep them or you are an important enough customer. Funny enough our shredding facility is in Indianapolis...so the checks still travel but this time they are traveling to their doom!”

“cheque
a check is that thing you do when you're playing hockey”

“I have one question. If clearing checks electronically is so easy now, why will it still take so long for deposits to clear?”

“I never said nor implied it was the sole reason for anything, much less online banking. It was a wake up call that finally got things moving. Hardly an excuse.”

“"I have one question. If clearing checks electronically is so easy now, why will it still take so long for deposits to clear?”
Treebleeding"

We make money on your funds by holding them for a time short as a day. That and it takes awhile for all of the databases to synchronize, transfer funds from other banks, etc. So part of the delay is for processing the other part is money.

HPM--agreed. I just get tired of hearing, "things are this way because of 9/11" this or that because of 9/11. My neighbor lost her job because of 9/11 but her company had nothing to do with the WTC or anything related to 9/11...it was just their excuse for the lay off. Same thing at my old job, "sales are down because of 9/11." No, sales were down because we have an overpaid idiot for a CEO who doesn't listen to the customers.”

“In the near future....BIC (Branch Image Capture), iATM (Image Enabled ATM's), POSi (Point of Sale Image) and so on and so on will infiltrate our society. What does this mean to the consumer? The checks you physically bring to a branch or ATM will immediately be transformed into an image and posting will occur "real time". Virtually eliminating any float. Consumers are going to be called upon to restructure their replenishing behaviour. Again, NSF's will run rampate for the short term. Another conduit for banks to reap additional income in the form of fees. But the real value to all of this comes in the ability to invest in overnight funds on much larger scale and much sooner than they were able to.

Bank One has about 5 or so iATM's in beta testing. Walmart recently finished an iPOS process where the check was captured as an image by the store clerk and then handed back to the customer...then in "batches" these checks would be processed and posting would occur "same day". Again hitting customers accounts sooner than they would prefer. But Walmart ran into some snags and has put this on the shelf for now. However, look for this type of POS process to evolve in a neighborhood near you.

Another process that was enacted last year (March '03) that sort of went overlooked by most and i'm sure some of you have seen this type of transaction in your accounts. The process is called ARC. Accounts Recievable Conversion. Basically...a company like American Express recieves your check for payment....then they immediately truncate it and capture the MICR data from the check and convert it to an ACH. What this means is...Amex no longer needs to physically handle the check and they can post to your account same day via the Paying Bank electronically in the form of an ACH (Automated Clearing House).

Dub...yep...Mail Float is probably the only "true" remaining floating scheme left.

Oh...one other misconception to clarify...Debit Cards....these devices primarily replaced cash and has virtually no affect on check transactions.”

“...but lots of checks I deposit take 3 to 5 days to clear.”