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It might. Check 21 is an important new law that affects the processing
of checks you write. The law is called the Check Clearing
for the 21st Century Act, or Check 21 for short. It is the first major revision
to the United States checking system in nearly 50 years, and it will change how
your checks are processed, how long it takes them to clear your account, and
their appearance after they have cleared.
Even with today’s computer technology, paper checks are still processed
by physically transporting them around the country between credit unions and
banks. A check you write to pay a bill, for example, may take days to travel
back to your account here at Premier Credit Union. This time is known as “float.”
In the weeks after the September 11th tragedy, however, the grounding of air
travel upset the transportation of checks through the processing system. The
float period was extended from days to weeks while checks sat in plastic bins
at airports.
To avoid a repeat of this situation, Check 21 was signed into law on October
28th, 2003, and becomes effective October 28th, 2004. It’s designed to
foster innovation and efficiency in the payment system by reducing some of the
legal barriers to check truncation. Truncation means removing an original paper
check from the check collection or return process, just as credit unions successfully
have done for years.
The law eases the electronic exchange of checks by making electronic check
processing voluntary and not mandatory. The law mandates that all institutions
accept a substitute check (the paper and legal copy of an electronic check file),
but doesn’t mandate that all financial institutions accept electronic checks.
As with paper checks, different credit unions and banks will have different
processing times for check images. This means that you will notice no difference
in clearing time for some checks you write, while other checks will clear faster.
You should therefore be ready for float time to be reduced for some checks starting
in the weeks leading up to October 28th.
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