New law requires checks to clear immediately

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When rent is due for an apartment, some students may write the check and send it to their landlord, putting the money in their account a day or two later.

Now, because of a new law called Check 21, that so-called "float time" may disappear, meaning check-writers should have the correct amount of money in their account before they write the check.

Check 21 works by allowing banks to process checks electronically instead of having to mail the paper check to the issuing bank. It means checks can clear within a day of reception instead of two or three days, according to Kathryn Crumpton, manager of the Consumer Credit Counseling Service of Greater Milwaukee.

It also means check floaters will have to pay bounced check fees.

"If you don't have the money in your account, don't write the check," Crumpton said.

Bounced check fees could be substantial.

The new system also means banks do not have to return checks, Crumpton said. Instead, people have to ask for a "substitute check," which is a copy of the original check.

The situion concerns Crumpton, because of the chance of check fraud. She said if a $10 check accidentally cleared at $100 and no substitute check was requested, the consumer would have no recourse.

Unfortunately, Crumpton said, many consumers are not aware of the law, even though many banks sent out information.

"If you don't know what your bank is doing, you might have thrown it out," Crumpton said.

U.S. Bank, which has a branch in the Alumni Memorial Union, will be taking advantage of Check 21.

According to Shalanda Galloway, a teller at the AMU branch of U.S. Bank, the company is instituting a process that allows banks to clear funds electronically so checks can clear overnight. She said the bank is pushing its customers to use online bill pay instead of writing checks.

Crumpton said many banks are discouraging the use of checks.

Area businesses welcome the law but admit it won't change a whole lot.

Ed Sweeney, owner of Sweeney's College Books, 1634 W. Wisconsin Ave., said more students have been using debit cards, which deduct from a student's checking or savings account, over checks. While a student may pay with a check, the law still is "not a big deal," Sweeney said.

Jason Petty, a manager at Radio Shack, 1616 W. Wisconsin Ave., said about 25 percent of their customers, including college students, use checks. He said in business terms, it's much better to have the check clear faster.

Students should be able to avoid most problems with Check 21, Crumpton said, since they are more likely to use debit cards and online bill pay, both of which deduct from a checking or savings account quickly, instead of writing a check.