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New Federal Law in Effect

By David Bowles

Funds from checks written to business’s will be available sooner, and should there be a problem with the item merchants will be made aware of it in 2 to 3 days rather than the 10 days it has taken banks in the past to return the actual check. Merchants utilizing “check conversion” at the point of sale will be able to represent the check electronically.

Checks now will be cleared so rapidly that it will virtually put an end to “Stop Payment” check problems created by disgruntled customers. That means the check writer will have to go back to the business with their complaints rather than using their bank as a mediator in a dispute.

Like all new things, remember there will be issues concerning Check 21 implementation by the banks and on going adjustments for many months. One issue raised by District and County Attorney’s around the State of Texas is the prosecution of bad check writers. I recently attended a breakfast meeting of the Alamo Executives Association addressing the concerns of the prosecution of Hot Checks under the new Check 21 Act.

Sandra Ruedrich Chief of the Hot Check Section of the Bexar County District Attorney’s office runs one of the most successful hot check programs in the State of Texas. The Bexar County District Attorney’s Check Section returned over $7 million dollars to Bexar County merchants last year. Ms. Ruedrich outlined to the Alamo Executive Association how this new regulation will impact the prosecution of bad checks under the Check 21 Act in Bexar County Texas.

“This new federal check regulation with definitely have an adverse effect on the ability of law enforcement officials in prosecuting hot check writers” said Ruedrich. Texas law, unlike California and other states, still considers theft by check a criminal offense. That is a good thing for merchants who receive large checks. Jo Ann Guzman, manager of Check Services USA a San Antonio based check verification and recovery service says “that checks over $1500 are a felony in Texas and for that reason they are much easier to collect than those checks that fall under the felony amount. Checks under $1500 are prosecuted as either theft by check or issuance of a bad check both a misdemeanor in Texas.

Ruedrich stated “that with out the actual check as evidence, prosecution of bad check writers will be difficult”. Investigators will no longer have the check for handwriting analysis or fingerprint identification. Information that merchants have written on the check may be obliterated by the imaging process. No one is sure at this writing if merchant information written on the checks will image onto the substitute check or the imaged check.

Merchants and business owners that know their regular customers should not have anymore problems with their bad checks than before Check 21. The exception being an influx of checks bouncing during the first few months of the new Check 21 procedures. After check writers learn that there is no longer a float, and they have to pay the banks expensive overdraft fees, NSF checks will level off. These NSF fees charged by banks will create a new group of Non-Banked consumers. (Look for my article on this subject in the next news letter).

It is important to understand that 99.24% of checks received are good. Of the less than 1% that are dishonored more than half are check writer errors and will be made good by the consumer.

The remainder less than .20% usually falls into the category of fraud, forged or altered checks. The purpose of this article is to advise that prosecuting those that steal from you with a ball point pen will be much more difficult in the future. Remember the checks you now deposit will never be seen by you again. If you feel the need to write check writer information on the check, consider writing it on the invoice you keep instead.

You can learn more about Check 21 at www.consumerunion.org and the American Bankers Association’s “Check 21 Resource Center” at www.aba.com. I would like to hear how your local District/County attorney or Justice Courts are handling prosecution under Check 21. I can be reached at david@dabow-inc.com or pick up the phone and call me at 866-481-1110.