DENVER—Consumers are
going to lose valuable rights on October 28 when Check 21, a new federal banking
law, takes effect. Under this new law, consumers will no longer be able to request
their cancelled checks be returned with their monthly statements because banks
will be permitted to process all checks electronically by converting paper checks
into electronic images and back to paper versions of the electronic image without
ever moving the paper check. The law is designed to save banks money and time
in the check clearing process.
"While Check 21gives
banks faster clearing of the checks we write to others, it doesn't require banks
to give us quicker access to the checks we deposit, "said CoPIRG's Ben
Davis. "That means big bounced check problems for consumers and big bounced
check fee income for banks."
In addition to its shortening
of the float on checks consumers write, CoPIRG pointed out the other main impact
of the new law: First, Check 21 will facilitate the process for banks to convert
checks to digital images or pictures. Consumers can continue to receive these
images instead of cancelled checks, but under the law, images are not legally
equivalent to a cancelled check in a dispute. Second, banks may charge extra
fees to receive a special kind of copy of the check which is legally equivalent
to the original cancelled check and which triggers an important new consumer
right. This special kind of copy is called a substitute check.
"The only way consumers
will know if there is a problem with their accounts is to read their statements
carefully and check everything that is returned with the statement," added
Davis. "If you see a problem remember that all copies are not created equal,
you will need to specifically ask for a substitute check - not merely a copy
- to legally resolve any dispute with a merchant or creditor. An image is not
a substitute check, and not every paper copy is a substitute check."
"When you use your
debit card at a merchant or when a merchant converts a check at point of sale
to an electronic transfer, you have a legal ten business day right of recredit
in any dispute," added Davis, "But when you have a dispute over a
check that you've written, for example, if the check is paid twice, paid for
the wrong amount, or otherwise paid in error, you will not have that same 10
business day right of re-credit unless have received a substitute check."
CoPIRG is recommending several
steps for consumers to take in order to both inform and protect themselves from
these new laws:
· Only write the check if the funds are in the bank. With the use of
new electronic images, banks may process a check within hours of when they were
written; negating the "float time" many consumers take advantage of.
This will likely lead to more bounced checks and overdraft fees.
· Know and understand what "substitute checks" are. Under Check
21, the only legal substitute for a cancelled check is a substitute check. A
substitute check is a paper copy of an electronic image of your cancelled check,
but not all images provided by banks are not legally the same as substitute
checks. Substitute checks are required start a ten business day timetable for
a bank to fix any errors in payment of a check from a consumer's account.. CoPIRG
advises consumers to contact their bank and inquire whether or not they will
be charged a fee to obtain a substitute check.
· Consumers should carefully examine all bank statements. Since paper
checks will be scanned into an electronic image, there is a chance that the
bank will double-debit a customer's account, b posting both the original check
and its electronic copy. Another problem could occur during the transfer from
paper to electronic file if the amount written on the check is misread. CoPIRG
recommends that consumers carefully track all written checks and take the time
to read their bank's monthly statement to insure that no bank errors occurred.
If an error has occurred, they should obtain a substitute check from their bank
immediately in order to prove the error.
· Consumers have the right under Check 21 for a re-credit within ten
days of the mistake being made. In order for a re-credit to occur they must
first obtain a substitute check.
More information is available
at the Colorado Public Interest Research Groups website: www.copirg.org
