Important NEW LAW: Check21 effective on Oct 28, 2004

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in this case, this is something that
we should all be aware of.

Starting on October 28, the
"The Check Clearing for the 21st Century Act"
(commonly referred to as Check21) will become effective.
It is a federal law that creates and governs
the use of something called a 'substitute check'.
(Yes we can thank "9/11" for this ).

Simply put, this allows banks to make
an electronic (digital) image of a check and
then to transmit this image to another bank for payment.
EVERY bank MUST accept these "substitute checks".
What does this mean to the consumer?
It means that checks now can potentially "clear"
in a matter of SECONDS!! NOT DAYS!!!

Now, many of us have 'floated' a check
the practice of writing a check when
you have insufficient funds to cover the check
with the hope that by the time the check 'clears'
(is presented for payment), your direct deposit
will have occurred and you have money
in the bank to cover the check.

TRUST ME, IF YOU PRACTICE THIS, IT'S
A GOOD IDEA TO STOP IMMEDIATELY AFTER 10/28!!!
Because banks can now use a replacement check
created from the electronic image of a real,
"paper" check, they can transmit the
"imaged check" (substitute check) electronically
to the issuing bank for immediate processing.

Here's an example: Joe's rent is due on
Friday, Sept. 30. Joe has $20.00 in
his checking account. Joe's direct deposit
from his job at will not go in until Tuesday, Oct. 4.
Joe writes a check and delivers the check on Friday.
The rental office deposits the check in their bank.
Their bank can now make an electronic image
of Joe's check and then electronically transmit this
image to Joe's bank for payment.
All of this could happen before Tuesday,
Oct. 4 when Joe's direct deposit goes in.
Now, Joe has bounced his rent check.

The following site
http://www.sovereignbank.com/personal/banking/check21.asp
has a pretty good write-up on Check21.
You owe it to yourself to check out the information.

(A "GOOGLE" search for "Check21" should also turn up
some good information!).
 
Looks like we may foresee a lot of 'bouncin' around until the consumers get fed up with the penalties imposed for bouncing checks...although, like the example you've implied here...generally as you stated that Joe may have written a check with insufficient funds in his bank account for his rent, but the date written on his check is postdated, which means he writes the check for the day it should be activated, not on the day that he sends it...therefore, he'll be fine without his account being penalized. ;)
 
Good question/idea !!
Hmm, I'm NOT even sure when
if you write the check date "Oct 4th" instead
of "Sept 30th"
would this Check21 system work or not ??
 
Y said:
Good question/idea !!
Hmm, I'm NOT even sure when
if you write the check date "Oct 4th" instead
of "Sept 30th"
would this Check21 system work or not ??
Click to expand...

Logically I think it would work because the check cannot be cleared on any other day except for the date it's written on the check...in most cases, the person writing the check usually will make a 'note' of the post-dated check to which the check will then be held until the day it can be activated or cleared....but it is something to follow up on though.... ;)
 
No, the date on the check is literally NO GOOD. Neither banks nor the check receiptient absolutely need to comply with the date written on the check. So, the lesson is, DO NOT WRITE CHECKS that you CANNOT PAY!

I've already gone over to pay most/all of my bills with some form of electronic payment -- less hassle, faster turnaround, means I'm more sure of what I have in my balance. Same goes for direct deposit -- I'm entirely sure it's in my account the moment it's wired. Something gets screwed up, I'm prepared beforehand with the phone numbers of who to scream at.
 
Yeah as Dennis said, the only person that is likely to notice the date would be a teller, otherwise the checks are processed en masse, especially for something like a business that has a lot of checks to deposit.

Kiting or Floating a check is basically illegal since you are passing a check that you know is bad (even if it will be good by the time it is processed).
 
That's correct Dennis and PeteEMT about the banks processing the checks as they do come....but my point was more of when writing a check and giving it to, let's say, a land-lord, and then indicating that he is to 'hold' the check without taking it to the bank when it has been post-dated...also, I have seen tellers refusing to accept checks that were post-dated...although, not every bank processes in the same format as others....
 
Roadrunner said:
That's correct Dennis and PeteEMT about the banks processing the checks as they do come....but my point was more of when writing a check and giving it to, let's say, a land-lord, and then indicating that he is to 'hold' the check without taking it to the bank when it has been post-dated...also, I have seen tellers refusing to accept checks that were post-dated...although, not every bank processes in the same format as others....
Click to expand...
Bank tellers refuse to accept checks that are post-dated because they are illegal documents. It is against the law to intentionally write a check on an account that has insufficient (not enough) funds; that is fraud. You can actually go to jail for that.
Sometimes landlords and other people accept post-dated checks, but technically a bill is not paid until the check is processed on the actual date written. A landlord (or any person) has the legal right to refuse a post-dated check.
 
Reba said:
Bank tellers refuse to accept checks that are post-dated because they are illegal documents. It is against the law to intentionally write a check on an account that has insufficient (not enough) funds; that is fraud. You can actually go to jail for that.

Sometimes landlords and other people accept post-dated checks, but technically a bill is not paid until the check is processed on the actual date written. A landlord (or any person) has the legal right to refuse a post-dated check.
Click to expand...

Post-dated checks are not illegal, they are perfectly legal as long you follow a few specific rules. But like you say, if a person intentionally write a check knowing it'll bounce, then it is illegal.

http://www.nbmda.org/what/tax_tips/postdating_checks.html
 
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