Check Clearing for the 21st Century Act Questions and Answers
Why Check 21?
Why was the Check 21 Act passed?
Response: This law was passed in 2003 by Congress and signed into law by the president. All financial institutions are required to comply.
The need for the Check 21 Act was realized after September 11, 2001. The transportation and processing of paper checks was put on hold for days because air traffic was grounded. Also, a paper check is physically handled an average of 26 times during the processing stages adding days to the total processing time.
Has the Check 21 Act drastically effect consumers?
Response: Most consumers have felt only a "low-to-moderate ripple" impact - many have not even noticed an impact at all. Many expects still expect Check 21 will 'revolutionize' the check clearing process the change will occur slowly over a matter of years.
Bouncing Checks & NSF Fees & Deposits
I have read that now I will be more likely to bounce checks and be charged NSF fees. What is this all about?
Response: Because checks may be converted to an electronic check file the checks may clear more quickly than you've been used to over the years. If you've previously relied on the few days a paper check usually takes to clear - you may be more likely to bounce a check. To avoid bouncing checks and incurring any fees, do not write a check unless there is enough money in your checking account to clear the check.
What happens if I'm depositing a check into my account to cover checks that I've already written?
Response: All of your deposits should be made before you write your checks. When you deposit funds to cover checks that you have already written, you risk facing overdraft charges if the deposited funds are not available before the checks that you wrote are presented to clear against your account.
If the checks that I write are going to clear faster, does that mean that checks I deposit into my account will clear sooner too?
Response: They may, but there is no way to tell when a deposit is made. The Check 21 legislation does not impact the hold times that are allowed to be placed on deposited items by the Expedited Funds Availability Act although this may be reviewed in the future.
Is DCU planning on changing its hold periods on deposited checks?
Response: Not at this time. DCU's current hold policy is more lenient than what is allowed under the Expedited Funds Availability Act. However, the DCU hold policy may be revisited in the future once we can determine the impact of the Check 21 Act.
Sometimes I write checks when I don't actually have the funds in my account. I know that there is a float period, so my checks won't clear immediately. What happens now with Check 21 in effect?
Response: If your check is transmitted electronically - the float will disappear or at the very least be dramatically reduced. To avoid bouncing checks and incurring any fees, do not depend on a float period anymore. You should only write checks when you have those funds available in your checking account.
How quickly could a check clear under Check 21?
Response: If an institution converts a check to an electronic image, the check could clear within hours.
Is DCU converting the checks that I deposit into electronic checks files?
Response: Yes. DCU does electronically convert checks deposited at DCU.
Stop Payments and Check 21
I have heard that now it will be harder for me to stop a check that I wrote from my account. Why would this happen?
Response: If you wrote a check and it was converted to an electronic check file, you would have less time to place a stop payment on the check because the check will clear faster. Do not write a check with the thought that you can place a stop payment on it later if you change your mind.
Substitute Checks
I keep hearing this term "substitute check." Can you explain exactly what this is?
Response: A substitute check is a paper copy of a check that was created from an electronic check file. The financial institution that created or first handles the substitute check warrants it is an accurate and legible reproduction of the original item.
What's the difference between checks converted under Check 21 and Electronic Check Conversion (or e-checks)?
Response: There are differences but this could be very confusing.
Electronic Check Conversion is the process of converting a physical consumer check (at the point-of-sale, for example) to an Automated Clearing House (ACH) item. The merchant must notify the customer (this notification does not have to be verbal - may be in writing) that the check will be electronically converted and this can only be done with consumer checks. (ACH Rules apply).
Check 21 allows a check to be processed electronically from a digital image of the original item, and for the original item's replacement with a substitute check. Check 21 applies to all items drawn on US banks in US dollars and the consumer does not need to consent to or be notified of the replacement prior to its taking place. (Paper Check rules apply)
Is there any way to tell which of my checks will be converted?
Response: Not really, because it can happen anywhere during the check clearing process.
What does a substitute check look like?
Response: The substitute check contains a copy of the front and back of the original item, as well as special reference information. It is about the same size of a standard business check. The front of the substitute check MUST bear the legend/statement "This is a LEGAL COPY of your check. You can use it the same way you would use the original check."
I have read that if I want to get a copy of a check, I should ask for a substitute check because I'll have more rights.
Response: This is very misleading. If your original check was not converted to an electronic image for processing, there is no substitute check to get. A substitute check replaces the original check. If none of the institutions involved in the clearing process of your check converted the check to an electronic image, there will not be a substitute check because one was never created.
What if I need the original check that was written from my account? I've heard that now I won't be able to get my original check back.
Response: Original checks aren't available now. If the check that you wrote is turned into a substitute check, the substitute check has the same validity as the original check. Yet, regular check copies have long been accepted for things like proof of payment, etc.
I read that there are no limits on what institutions can charge for substitute check fees. Will I be charged fees for substitute checks?
Response: DCU has no plans to charge substitute check fees.
Security
I'm uncomfortable with the idea of my check being converted to an electronic image. Is this secure?
Response: Electronic check processing is not a new concept in the financial industry. The technology used in processing checks this way has been developed and tested for security and has been in use in one form or another for years. We assure you that this is a safe and reliable way to process your checks.
Errors & Consumers' Rights
I've been told that I've lost a lot of my consumer rights because of Check 21.
Response: One of the biggest misconceptions is that Check 21 took away consumers' rights to have errors on their accounts fixed. You still have all of the rights you previously had under the Uniform Commercial Code and Regulation CC, for example. Check 21 actually provides you with additional rights if an error occurred as a result of the conversion of the original check you wrote to a substitute check.
If an error occurred on your account after Check 21 - you will have all of the same protections you had before Check 21 PLUS some.
I read that if a check clears from my account twice or the wrong amount is paid, I can only get a credit if I've received a substitute check.
Response: If a check clears your account twice or clears for the wrong amount, call DCU as soon as possible. As always, we will quickly correct the discrepancy as long as it is a valid error.
If you physically received a substitute check, DCU may process the adjustment as an "expedited recredit" which requires the funds be credited back to you account within a specific number of days while we investigate the claim. Just remember to inform DCU within 40 days of receiving your statement with the error posted on it or within 40 days of receiving the substitute check if you are making an expedited recredit claim. This is expected to be extremely rare.
When can I file an expedited recredit claim?
Response: You may file an expedited recredit claim if the following conditions are met: you received an actual substitute check (not just a copy of the original); your account was charged for a substitute check; the substitute check was incorrectly charged or you have a warranty claim in regards to the substitute check; you suffered a resulting loss, AND the production of the original check or a sufficient copy of the original check is necessary to deem whether or not the substitute check was incorrectly charged or whether your warranty claim is valid.
How do I file a claim when there is a substitute check involved?
Response: If you have a warranty or an indemnity claim, you can call our Information Center at 800.328.8797, contact an E-Branch specialist, or go to the DCU branch nearest to you. If you have an expedited recredit claim, you must complete a form in order for us to process the claim. Remember, you can only file an expedited recredit claim when you have suffered a loss due to a substitute check and have physically received the actual substitute check. If you received a copy of a substitute check, you cannot file an expedited recredit claim but errors will of course still be corrected in a timely manner. To file an expedited recredit claim, contact our Information Center or an E-Branch specialist, visit our website at www.dcu.org, or visit the DCU branch nearest to you to fill out the form.
Fraud
What about detecting fraud?
Response: Because the check processing time is quicker, we believe that fraud may be detected sooner.
I have read that a substitute check will not be as useful as the original in proving forgery or alteration.
Response: Unfortunately, in certain cases the original check would be more useful in proving fraud. These instances include determining pen pressure used in writing the check and handwriting analysis. In general, for best image quality and fraud detection, always use black ink when writing a check.
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Digital Federal Credit Union 220 Donald Lynch Boulevard PO Box 9130 Marlborough, MA 01752-9130 508.263.6700 • 800.328.8797 |
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