 | Mike Sikes
is Senior Vice President and Chief Lending Officer for Prairie State Bank. He has over 24 years of banking experience. Mike is a member of the Wichita Area Builders Association, the Wichita Area Association of Realtors and serves on the board of directors for the Boy Scouts of America Quivera Council. You may contact Mike at (316) 775-5434 or msikes@prairiestatebank.com |
Banking & Finance
2004-10-01 14:42:00
What is ‘Check 21’?
: What is Check 21?
ANSWER: Check Clearing for the 21st Century or Check 21 as it is commonly known takes effect October 28, 2004. This new federal legislation permits banks to convert a paper check into an electronic image and send this image or a substitute check back to the bank it is drawn on for collection rather than the original check. What does this mean to you as a consumer?1) Checks will be processed more quickly. In the past, some consumers often relied on what is known as float time (the time from which a check is written to the time it actually clears the customer's account) to avoid being overdrawn. Float time will now be greatly reduced or even eliminated as electronic images can be transmitted between banks nationwide the same day. If you write a check make sure funds are already in your account to cover the check as it is likely to clear more quickly than it has in the past.2) You may not receive your original check back. Most banks already provide an image of your canceled check rather than sending the original check back to you. These electronic images make filing and storing bank statements much simpler. Some banks, however, still continue to send original checks to the customer with their monthly statement. With Check 21, the collecting bank may now actually destroy the original check once an electronic image is made, thereby, not allowing your bank to send you anything but an image of the check or a substitute check for record keeping. A substitute check is the legal equivalent of the original check and will contain images of both the front and back sides of the check.3) Any check errors should be resolved faster. Transmission of electronic images will allow banks to view disputed checks or errors more quickly enabling faster resolutions to a problem. If the bank cannot resolve the dispute within 10 business days, the bank is required to credit your account for up to $2,500 of the face value of the check, plus any applicable interest. If the dispute is not resolved within 45 calendar days, the bank will credit the remaining amount due, plus any applicable interest. Overall fraud should also reduce under Check 21 due to banks being able to collect data more quickly which will help in identifying fraudulent activity.Paper checks continue to play an important role in the financial industry, but the way they are processed is changing in efforts to remain efficient and effective in today's electronic world.
