Consumers: Pay Attention to New Checking Law
- Tuesday, October 26, 2004
No more float
The "float" is the unofficial grace period between the time you write a check and when the money is taken out of your account. Say goodbye to the float, forever. This law allows your check to be handled electronically, just like a debit card payment. You dare not write a check unless you have the full amount in your account the moment you sign your name-that is how fast the check will be processed. You cannot afford to be socked with big overdraft or bounce fees which banks have wasted no time in establishing.
No more stop payments
Remember the good old days when you could stop payment on a check because you changed your mind or the service was unacceptable? Well you can kiss those days goodbye. You will no longer have the luxury of time to change your mind.
No more cancelled checks
You won't be able to get your original paper checks back because your bank will not have them. Eventually they will be truncated even if it is after they get back to your bank. Your paper checks will be copied as "substitute checks" and then destroyed the moment they become electronic transactions. Cancelled checks for proof of payment or to fight a forgery are a thing of the past. This is very important: You want to make sure your bank sends you copies of your substitute checks, which will be legal proof of payment. Watch out for fees associated with a substitute check-returning account. Look for another bank if your bank charges a high fee to get copies of all your checks as substitute checks.
Placing hold on deposits
Just because your checks will clear faster doesn't mean your deposits will be available to you any sooner. As a clear indication that this law benefits banks and not the consumers who keep them in business, the new law does not shorten check hold times.
Watch your account
As stated, the possibility exists that a check can be turned into an electronic transaction with a "substitute check" and the original paper check fails to be destroyed, allowing it to make the rounds and be debited against your account a second time. Now more than ever it is important that you keep an eye on your account for such errors. If you spot an error or suspect fraud, the bank must put the money back into your account within 10 business days, but only if you have not waived your rights to have "substitute" checks provided to you.
Don't volunteer to truncate
Your bank may ask you to agree to "voluntary check truncation." This means you give up your rights to having copies of your substitute checks returned to you. If you do this you will have even fewer consumer rights with the voluntary non-return of your checks than you will have under the full provisions of Check 21. It is highly recommended that you decline invitations from your bank to convert to "voluntary check truncation."
The foregoing is only a summary of portions of Check 21. It is a complicated law. You owe it to yourself to learn as much as you can about how this law will affect you.
You can learn all about Check 21 and its provisions at the Consumers Union website, www.consumersunion.org. Look for the article, "Checking Law Means Trouble."
© 2004 The Cheapskate Monthly. All rights reserved. Used with permission.
"The Cheapskate Monthly" was founded in 1992 by Mary Hunt. What began as a newsletter to encourage and empower people to break free from the bondage of consumer debt has grown into a huge community of ordinary people who have achieved remarkable success in their quest to effectively manage their money and stay out of debt. Today, "The Cheapskate Monthly" is read by close to 100,000 Cheapskates. Click here to subscribe.
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