Law speeds up check processing

By Nick Zombolas

Checks may be turning into cash much faster starting today, thanks to the Federal Reserve Board’s 21st Century Act, also known as “Check 21.”

Check 21, which becomes effective today, is a federal law that enables banks to process more checks electronically, according to Susan Stawick, spokeswoman for the Federal Reserve. This will make processing checks much quicker because banks will no longer need to physically move checks from one bank to another.

Banks will be able to send checks electronically by means of a “substitute check,” Stawick said. This kind of check is a paper copy of the front and back of an original check. By sending a “substitute check,” checks can be received and processed quickly.

Also, since various banks have already used other forms of electronic check processing, she said the system is expected to be a safe and reliable way of processing checks and payments.

Stawick also said despite Check 21 going into effect today, it will be up to individual banks whether to process checks electronically.

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Julia Haege, a banker for National City Bank, 201 E. Green St. in Champaign, said she thinks Check 21 will be very beneficial.

“Check 21 is a really good thing because it will cut down on processing errors,” she said.

However, Haege said Check 21 might be more problematic than beneficial for some. She said this will be the result of more overdrafts occurring because of faster check processing.

“A person may write a check, but a deposit they made may not be there, causing an overdraft,” she said. “This could affect the relationship between a bank and its customers.”

Haege said that before Check 21, checks could take anywhere between two and five days to be processed. With Check 21 in effect, she said checks will typically be processed the same day, sometimes within hours.

Because the National City Bank Haege works for is on campus, she said many of the bank’s customers are students.

So far, Haege said the only concern the National City Bank has received about Check 21 is from some of its older clients who are worried about getting copies of their checks back. Because checks will be processed electronically, customers will not be able to receive copies of all their checks. Also, some of the copies received may be the “substitute checks.”

Tim Hopper, freshman in ACES, said he has concerns about Check 21 because he sometimes relied on the time it took for checks to be processed.

“When I write checks now, I’m going to have to be really careful about having enough money in my account for the check to clear,” he said.