SACRAMENTO, CA – The California Bankers Association (CBA) is alerting consumers to changes that may occur in the way their checks are processed as a result of the new Check Clearing for the 21st Century Act, or “Check 21.”
“Check 21 is a new regulation that will provide consumers with greater efficiency when it comes to having their checks processed, but it will also provide them greater protections against check fraud,” said CBA president and CEO Janet Lamkin. “Additionally, Check 21 will take greater advantage of technological advances. For decades, checks have been processed only after traveling hundreds or thousands of miles on cargo carriers. As the 9-11 attacks and the recent wave of hurricanes in Florida have shown us, sometimes our check processing is slowed or even stopped because our cargo carriers are grounded. We are confident that this new way of processing checks will provide consumers with greater fraud protections, as well as the continuity they expect and deserve.”
- Check 21 mandates that all banks are able to accept and process electronic images of checks, but it does not require them to do so. Because check images can now be transmitted electronically, checks can be processed more quickly. For customers who depend on “float” time to ensure that their checks don’t “bounce,” an adjustment will need to be made, as “float” time is expected to decrease as a result of this new law.
- Check fraud can be detected more quickly under Check 21. This faster detection means faster resolution for the customer.
- Electronic check processing will co-exist with paper processing for some time, though there is some conjecture that banks will convert to electronic check processing in the near term.
- Check 21 creates a new negotiable instrument, the “substitute check,” which can be used for proof of payment and has all the legal properties of the original. Substitute checks are created from electronic images of original paper checks and are required to include the following statement: “This is a LEGAL COPY of your check. You can use it the same way you would use the original check.”
- To help customers understand substitute checks, banks will send notices to accountholders that currently receive original checks. These notices will explain the benefits of the new technology and customers’ rights under the Check 21 law.
Information about CBA
Established more than 110 years ago, the California Bankers Association (CBA) is one of the largest state banking trade associations in the country. CBA leads the way in developing relevant educational and legislative solutions to some of California’s more pressing financial and banking issues, including financial privacy, predatory lending, usage fees, and financial elder abuse. CBA’s membership includes more than 300 of California’s commercial, industrial and community banks and savings associations.
For further information, visit www.calbankers.com or contact Anissa Yates at 916-441-7377.
