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New law cracks down on floating checks

Consumers beware: the "floating" check is coming to an end.

In an attempt to make the banking industry more efficient and save money, a federal law will go into effect Oct. 28, allowing banks to clear checks in a matter of hours instead of days.

The Check Clearing for the 21st Century Act, which will eventually do away with the paper form of checks, is expected to save the banking industry nearly $2 billion per year.

On average, banks charge between $20 and $30 to cover bounced checks. In addition, some banks charge a fee until a positive balance has been restored.

The change is due in large part to the industry's efforts to prevent another breakdown similar to what occurred after the Sept. 11 attack, said Alison Huszar, compliance attorney for the Illinois Bankers Association. During the tragedy, many checks weren't processed because of transportation delays in mail delivery.

"This shouldn't change anything," she said. "Consumers have always needed to be responsible in the use of their checking accounts. They should never write checks against insufficient funds."

With technological advances, some consumers have moved away from using paper checks and leaned toward using debit cards. But for those consumers who haven't warped into the world of ATM machines, Huszar said there still shouldn't be drastic adjustments needed.

Banking tendencies may not change, but spending habits will be effected, said Vicki Jacobson of the Consumer Credit Counseling Service.

"Floating checks has become a trend," Jacobson said. "There are people who send their check in the mail on Wednesday knowing that they won't have money until Friday. You'll have one of two things now. Either people will bounce their checks or their bills will be late."

The program, however, is not required of all banking institutions. In fact, some banking institutions may opt to not use the new system because of the money needed to buy the necessary equipment, Huszar said.

 

 

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