New Check 21 federal law means faster clearance

Insufficient funds carry price for check writers

MOSES LAKE — Check writers have new cause to be cautious.

Last week, a new federal law called Check 21 was passed, permitting institutions to substitute digital images of checks for original checks. It went into effect Thursday.

"Some were already in process, and now everyone has to do it," said Juliann Dodds, vice president of the Sterling Savings Bank in Moses Lake, explaining that now checks will go from bank to bank instead of through the Federal Reserve.

"What Check 21 does is, it's going to bring our check payment system into the computer and digital age," said Sherry Delgado, branch manager of the Washington Trust Bank. "It will benefit anyone that uses financial services because it creates a more efficient check processing system."

"It cuts down the time, basically, between the institutions for the clearance," said Karin Smith, counselor/manager for the Consumer Credit Counseling Service, located at 821 W. Broadway Ave., Suite 107.

Before, a person could go shopping at 10 a.m., and it would usually take up to 24 hours before it would even get to the bank, Smith said.

"It can now happen the same day if … it falls the right way," she said. "Sometimes people write checks before the money's in the bank. It can now happen that actually the check clears before the money is in the bank."

Dodds explained that if a person writes a check Thursday afternoon and gets paid Friday morning, they could be overdrawn come Friday morning.

That doesn't help many people, most of whom are living paycheck to paycheck anyway, Smith said.

"It's good for people because it will hopefully get them to start to understand the value of their money, that they need to live within the paycheck that they receive and hopefully reduce the amount of overdraft long term," Dodds said.

"People aren't supposed to write checks when they don't have money in the banks anyway, so that's a misnomer," Delgado said.

She said that not all of the financial institutions are presently set up to create digital images. She did not know how many banks are already set up, and said for some, it's off in the future. Washington Trust does do digital images, she said.

"Most of the customers right now are not going to notice anything at all," she said.

How much leeway banks give clients in these early days of the new regulations is a bank issue, Smith said.

"It depends on which bank you bank with," she said. "As I tell everybody, if you're looking for a bank, go interview them. You don't have to set up, just talk, questions. It's not a must."

Dodds said she could not speak for all banks, but Sterling calls all customers on overdrafts in the morning.

"Hopefully, they'll hear from us before they have to wait three days for the notice to come in the mail," Dodds said. "We're going to work real hard to help our customers through this."

Smith advised customers to be careful how they write checks, because they don't know how fast they will be cleared. That even relates to mailing checks, which can now clear in faster amounts of time.

"The time frame is going to be shorter than it is, usually," she said.