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Check 21 rules bring banking changes

Imagine this scenario. Someone goes to the grocery store to pack the pantry for the next few weeks. The shopper pays with a check and then deposits enough money to cover the check on the following day.

As of today, that scenario may soon be a thing of the past.

A new federal law nicknamed Check 21 takes effect Oct. 28, and it has bankers, retailers and consumers reminiscing about the soon-to-be good old days when "floating" a check was possible.

The Check Clearing for the 21st Century Act allows banks and other financial institutions to accept digital images of checks. This means that the grocery store -- or any other retailer that has the equipment -- will be able to scan a check and within the same day deposit funds from the customer's account.

"This is part of the legislation of Check 21; it's to improve the process of the collection of checks," said Riley Stamey, President of the SunTrust branch on Jackson Street in Thomson. "The merchant has the option of imaging those checks. Naturally, with that new technology, then the check can be presented that day for credit and/or clearing. So consumers need to be very aware of that."

According to bankers, the new regulations -- which shrink the time between when customers write checks and money is pulled from their account -- could catch some customers off guard. Once the checks are scanned, the original could be destroyed. Other than that, bankers say the changes won't be too drastic.

"Checks are probably always going to be here. This is just a way to reduce the amount of paperwork out there," said Ben Blassingame, branch manager of the Regions Bank on Main Street in Thomson.

Most bank customers are already familiar with check imaging. In years past, the actual check, after being cleared, would be returned for the customer's records. Now a copied image of the check is returned.

Check 21 just takes the concept a step further. The new law gives as much credence to the image as it does the original check. Banks can now accept a digital image as proof of payment. According to most, this should initially cut down on fraud.

"It might, in the beginning limit fraudulent activity, but somebody out there is eventually going to figure out the game," Mr. Blassingame said.

Of course to clear a check in minutes with a digital image takes updated technology that most stores won't have readily available, at least not in the near future. Larger retailers will most likely get the equipment first, as they are able to afford it. Some local stores don't have plans to conform to the new wave of purchasing any time soon.

"Some of the stores in Augusta are doing something different down there with some systems. I don't have it yet," said Bi-Lo Manager Rick McCorkle. "Some of the newer stores have the updated IBM stuff. I'd be willing to bet you they're going to do it. As old as mine is, it's not going to do it."

In response to the changes, bankers give the same old money management advice that they have been giving for years -- only use money you know you have.

"I think the first prudence of a checking account is you should always know that you have the funds on deposit before you write a check," Mr. Stamey said. "I think a lot of people don't know that."

Banks have sent out information on Check 21 to their customers through brochures. Bank customers are urged to contact their financial institution with questions or concerns about the changes taking place due to Check 21.



Web posted on Thursday, October 28, 2004


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