THE IMPACT OF CHECK 21- CHECKS ARE CHANGING
Congress has signed into law the Check Clearing for the 21st
Century Act, also known as “Check 21.” It is an effort to begin automating
the massive American check-processing system. This new federal law is going
to change our nation’s check-processing system, escalating the trend toward
the electronic processing of checks. It goes into effect on October 28,
2004. We hope these questions and answers will help you understand what
Check 21 will mean to you.
Why automation and what is going to happen on Oct. 28?
The traditional way to process a check for payment involves manually
handling checks via couriers over land and through the air. When the events
of September 11, 2001 occurred, the aviation-delivery component of check
processing stopped completely for days and many people, for the first time,
realized there had to be a better, more efficient way to process payments.
After Oct. 28, you may begin to receive “substitute checks” with your
monthly statements. Banks are required to accept a substitute check from
other banks in place of original checks, but will continue to accept
traditional checks as the new system evolves.
What exactly is a substitute check?
A substitute check is, well, just that – a substitute check that includes
all of the information on the paper original – images of both the front and
the back of the check, including the signature – and any endorsements. A
substitute check is acceptable as evidence of payment and is the legal
equivalent of the original paper check – and it bears a legend that says so.
What checks will be affected?
The checks affected by Check 21 include consumer checks, business checks,
cashier checks, teller checks, treasury checks and travelers’ checks.
How will it work?
Here is how a typical substitute check will be used beginning Oct.28: A
grandmother in Massachusetts sends her grandchild in California a check
drawn on “Bank A” in Massachusetts. The grandchild deposits the check in
“Bank B” in California. “Bank B” decides not to process the paper check in
the traditional manner but, rather, it transmits the necessary information
to process the check electronically to a Federal Reserve Bank in California.
That information is sent to the Federal Reserve Bank of Boston. It then
creates a substitute check and presents it to “Bank A” for collection. The
substitute check (or its image) then appears in the grandmother’s monthly
statement. The traditional paper collection process would have involved
transporting the check via ground and air couriers from California to
Massachusetts – a process that could take days. By using electronic
transmissions and a substitute check, the process can be reduced to hours.
Will all checks become substitute checks?
Not all checks will be turned into substitute checks. You should expect to
see both traditional checks and substitute checks included in your
statements for some time.
Is a substitute check the same as a check image – what some people see in
bank statements now?
No. A substitute check is not the same as a check image. Starting on Oct.
28, if you get images of your paid checks in your statements now, you will
begin to see images of substitute checks as well. If you receive your paper
checks in your statement, you will in some cases receive paper substitute
checks, as well as your original checks.
Can I get my original checks back if I want them?
If a substitute check was created, the answer is no. Remember, a substitute
check is the equivalent of an original paper check for all purposes, so you
can use it as if it were the original check.
Why is “playing the float” not a good idea?
You may not know if a substitute check is being created. Therefore, you
would be wise to assume it is, and that there will no longer be any float to
depend on. (Playing the float has always been illegal – you cannot
legally write a check knowing you don’t have the money in your account to
cover it.) After Oct. 28, the customer who is used to writing a check on
Wednesday to be covered by Friday’s paycheck could be out of luck as a
result of Check 21. It could clear as fast as Wednesday night.
How will I obtain check copies for legal reasons?
The bank will help you, as it does now with original paper checks, to get
copies of substitute checks if you need them for legal reasons.
What consumer protections do I have?
As always, you should review your monthly statements as soon as you receive
them. State and federal laws provide many protections against identity
theft, fraudulent transactions and other inappropriate actions, but the
protections only work if you review your statements and report any
discrepancies promptly to the bank. If you think a problem has occurred with
a substitute check, contact the bank immediately. The bank will send you a
notice explaining your rights.
Substitute Check Policy Disclosure and Your Rights- Important
Information About Your Checking Account.
What are my rights regarding substitute checks?
In certain cases, federal law provides a special procedure that allows you
to request for losses you suffer if a substitute check is posted to your
account (for example, if you think that we withdrew the wrong amount from
your account or that we withdrew money from your account more than once for
the same check). The losses you may attempt to recover under this procedure
may include the amount that was withdrawn from your account and fees that
were charged as a result of the withdrawal (for example, bounced check fees).
The amount of your refund under this procedure is limited to the amount of
your loss or the amount of the substitute check, whichever is less. You also
are entitled to interest on the amount of your refund if your account is an
interest-bearing account. If your loss exceeds the amount of the substitute
check, you may be able to recover additional amounts under other law.
If you use this procedure, you may receive up to $2,500 of your refund (plus
interest if your account earns interest) within 10 business days after we
received your claim and the remainder of your refund (plus interest if your
account earns interest) not later than 45 calendar days after we received
your claim.
We may reverse the refund (including any interest on the refund) if we later
are able to demonstrate that the substitute check was correctly posted to
your account.
How do I make a claim for a refund?
If you believe that you have suffered a loss relating to a substitute check
that you received and that was posted to your account, please write to us at
PO Box 920129 Needham, MA 02492. You must contact us within 40 calendar days
of the date that we mailed (or otherwise delivered by means to which you
agreed) the substitute check in question or the account statement showing
that the substitute check was posted to your account, whichever is later. We
will extend this time period if you were not able to make a timely claim
because of extraordinary circumstances.
Your claim must include-
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A description of why you have suffered a loss (for example, you think the
amount withdrawn was incorrect);
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An estimate of the amount of your loss;
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An explanation of why the substitute check you received is insufficient to
confirm that you suffered a loss; and
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A copy of the substitute check or the following information to help us
identify the substitute check:
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The check number;
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The name of the person to whom you wrote the check;
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The amount of the check.
Electronic Processing of Paper Checks
You may recently have noticed that many merchants are converting your
written checks into electronic checks. These electronic checks clear through
the ACH system - the same system by which you receive direct deposit.
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Electronic checks provide security - account information
is not seen by anyone once the check is turned into an electronic payment.
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Electronic checks give peace of mind - Federal
regulations give extra protection for electronic payments.
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Electronic checks are convenient - more information
appears on your checking account statement, such as the name of the
company to whom you wrote the check and the check number you used.
Merchants, such as a retail store or your credit card providers, will make a
copy of the check for their records and destroy the check. The check or
check image will not come back with your statement. You will need to request
a copy of the check from the merchant.
How this may affect your Needham Bank checking account
reconciliation:
Paper checks appear in the "Checks for NOW Accounts" section of your Needham
Bank statement. Electronic checks appear in the "Transactions for NOW
Accounts" section. The check number may or may not be referenced first
before the word "External Withdrawal" followed by the merchant name and
other pertinent description.
When you call our 24x7 Telephone
Banking system at
1-888-833-5590 to listen to your cleared checks, you
will hear electronic checks listed as withdrawals when you select the option
for "Last 5 ATM/Debit Card or Withdrawals". Electronic checks will not be
listed if the option for "Last 5 Checks Paid" is selected.
Who can you file complaints with?
You can contact the Federal Trade Commission (FTC) at
www.ftc.gov or 1-877-FTC-HELP (1-877-382-4357).
For more information, please visit the following sites:
