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September 22, 2004

More economic ignorance.

Banks canceling canceled checks
Consumer advocates balk at federally mandated high-tech system

By Ron Strom
? 2004 WorldNetDaily.com 

While critics of a new federally mandated check-processing system for banks set to go into effect next month are highlighting what they see as serious downsides for the millions of Americans who write checks every day, the companies who are helping financial institutions comply with the plan are confident it will benefit both banks and consumers. 

Last year, Congress passed the Check Clearing for the 21st Century Act, which was driven by the Federal Reserve. Supporters note the plan passed both houses of Congress unanimously. It goes into effect on Oct. 28 and represents the first major change in check processing since 1957. 

Though the plan was first conceived in 1999, the legislation gained momentum when the 9-11 terrorist attacks grounded planes for several days, causing delays in getting checks back to their banks of origin. 

Rather than sending each customer a statement along with all the checks written in the month, banks will begin using "image replacement documents," or IRDs. Under the new rules, an IRD will be considered a legal equivalent of the original check, which in most cases will be destroyed at a bank other than the one from which it was drawn. The law does not require the receiving bank to keep the original for any length of time. 

One of the biggest complaints about the new plan is the fact that with Check 21, the length of time between when a check is written and when the amount is debited from the account ? the "float" ? will lessen. Consumers, then, will likely bounce more checks as the processing gets quicker.


One thing people seem to forget is that when there is competition, savings always finds its way to the consumer. In order for banks to compete for customers they will use any savings in the expense of doing business to attract those customers. So if they can save money by not having to mail all those checks, then the consumers will benefit. But the ones that will suffer are the irresponsible ones who write checks for money that is not in their account. So the big whine is that a handful of irresponsible people will be inconveniences just to save everyone some moeny. Why, how selfish.


Posted by Jack Lewis at September 22, 2004 07:55 AM