Consumers Union offers Check 21 tips

While it's important for businesses and nancial institutions to understand how the new Check 21 law works, the Consumers Union, a nonprot publisher of consumer reports, wants to help consumers deal with the law.

In an Oct. 22 news release, the Consumers Union advised that people watch their bank statements carefully in the coming months.

"Check 21 will be a boon for the banks who will save billions of dollars once it's fully implemented," said Gail Hillebrand, senior attorney with the Consumers Union's West Coast ofce. "Consumers could end up losing out if they're not careful ... ."

Consumers Union and Consumer Federation of America have urged banks to adopt a set of policies to make the law more consumer-friendly. Thus far, more than 16,000 consumers in the United States have signed an online petition in support of reforms.

With Check 21, which went into effect Oct. 28, banks can process checks electronically. Consumers may see fewer canceled paper checks. Also because of the new law, written checks will clear the banks much more quickly. Under the new law, checks could clear as early as the same day. However, banks aren't obligated to make funds from deposited checks available any sooner. This could mean more bounced checks and more overdraft fees paid by consumers.

Consumer caution

To help consumers protect themselves, the Consumers Union has compiled a list of tips, in addition to reviewing their bank statements in order to better understand how Check 21 will affect them.

Expect the checks you write to clear faster, but not your deposited checks. Don't write checks unless the funds are already in your account. Most banks will credit deposited checks in one day if the check is local. ATM deposits can take an additional day to be credited, and out-of-town checks can take even more time. The best way to ensure that your paycheck will be deposited quickly is to arrange for direct deposit through your workplace. Social Security check recipients also can arrange for a direct deposit.

Ask for a "recredit" right in writing if your bank makes a check processing error. If a check you write is paid twice, or paid for the wrong amount, or something else goes wrong with your checking account, you may have the right to "recredit" under Check 21. This right means that you are entitled to have the funds returned to your account within 10 business days unless the bank proves that there was no error. If something goes wrong with your checking account, make a written request that your bank recredit the funds to your account. Your bank can avoid the 10-day deadline if you did not receive a substitute check.

Ask for a substitute check if there is a problem with your account involving a check. Check 21 restricts recredit to consumers who were provided with substitute checks. If there is a problem with your account involving a check, always ask for a substitute check, which is a special kind of copy of your paper check. If you now get your original checks back, you could ask for an account that returns subsitute checks every month. If your bank charges too much for an account that returns substitute checks every month, look for another bank.

nd out how your bank plans to treat you under Check 21. Not all banks plan to implement Check 21 in the same manner. Find out if your bank will give you a subsitute check if you ask for one, and if it plans to charge an extra fee for a substitute check. And nd out if your bank places a hold on your deposits so you can take steps to avoid bouncing checks and paying overdraft fees once the checks you write begin to clear the bank more quickly.

The Consumers Union has made available a fact sheet on Check 21. It can be found online at www.consumersunion.org/nance/ckclear1002.htm.