New law sinks 'check floating' practice
By Capt. Charles Warren, 12th Flying Training Wing Legal
/ Published October 15, 2004
RANDOLPH AIR FORCE BASE, Texas (AFPN) -- The practice of “floating” a check until payday will become a thing of the past Oct. 28 when the new federal Check Clearing for the 21st Century Act, also known as Check 21, goes into effect.
“Check floating” occurs when people write checks a few days before payday, figuring that by the time their checks hit the bank, there will be money in the accounts to cover them.
With Check 21, money will be withdrawn immediately from a person’s account when he or she writes a check.
The new federal law is designed to help banks efficiently process more checks electronically. This means that debits to a person’s checking account will occur in minutes, not days.
Paper checks as record-keeping devices will also become a thing of the past. Instead, banks will replace canceled checks with substitute checks -- paper copies of electronic images of a person’s original check. Consumers must have a substitute check to exercise all of their rights under Check 21 for the recrediting of their account in the event of a transactional error.
The potential effect on consumers is simple. Unwary consumers will be more likely to bounce checks because of the enhanced speed and efficiency of check processing.
Consumers probably will not be able to access funds from checks deposited in their accounts any sooner because the new law does not shorten check hold times for banks. This means people may not be able to withdraw money from their accounts the same day a deposit is made.
Here are a few tips to help people adjust their banking habits in response to Check 21:
-- Check your balance. Ensure you have sufficient funds in the checking account to cover any purchases made by check.
-- Request substitute checks. Although banks are not required by law to issue them, be persistent in requesting that substitute checks accompany bank statements.
-- Ask for a re-credit in writing. If a loss is related to a substitute check received, notify the bank in writing within 40 days of the bank statement and request a re-credit to the account. Do not forget to include the substitute check.
For more information about Check 21, visit the Consumers Union or the Federal Reserve Web sites. You can also contact a legal assistance attorney at the base legal office. (Courtesy of Air Education and Training Command News Service)