In 2003 the Congress bowed to a massive industry lobbying effort, passed the Check Clearing for the 21st Century Act*, commonly known as 'Check 21'. It was supposed to mandate the speeding up of check processing so that it took only a day or two for checks to clear.
However, banks always seem to find ways to confound the will of the Congress and/or the American people.
A recent issue of an industry periodical mentioned the case of a large bank that bought a smaller bank the same year that Check 21 passed. This smaller bank had cleared checks in from three to five business days, the standard at the time. Once it was bought by the larger bank, customers were surprised to see that their checks were clearing slower. It then took five to seven business days to clear.
Fortunately, the local branch managers had discretion to waive the NSF penalties. However, five years later things had gotten worse in terms of customer satisfaction. Deposit checks were clearing in seven to ten business days, in spite of the fact that 92 percent of the checks were being processed with faster check imaging or automatic transactions.
The branch managers no longer had discretion to forgive the NSF charges, either. The automated branch system had been altered to refuse any overrides.
So to put it in other words, the bank was using the 'float' which the account holders could no longer count on for their own benefit. It was getting its money in a day or two, yet holding it up for as much as ten days. The real kicker is that it is charging its customers for NSF fees when in fact the checks did not cause any insufficiency in the depositors' accounts.
Pretty nifty, hey? Wouldn't you like to have a nice scam like that?
What is the name of this bank? The industry source was perhaps too lawsuit-shy to mention the name of the company, and referred to it only as "Mega-Bank".
However, we do have a way of finding out what bank is doing this, and that is by asking you, the readers, if you have been shafted by your bank with this particular scam.
Please, if you comment on this story, do not weigh in with a laundry of bank errors or poor service. Feel free to suggest consumer remedies for cases like this, or identify who one has to complain to at state finance regulators, etc., or you may outline your own experience with NSF fees for checks you know darn well were deposited in plenty of time to clear.
*The Check Clearing for the 21st Century Act (Check 21) was signed into law on October 28, 2003, and became effective on October 28, 2004. From the Federal Reserve website: "Check 21 is designed to foster innovation in the payments system and to enhance its efficiency by reducing some of the legal impediments to check truncation. The law facilitates check truncation by creating a new negotiable instrument called a substitute check, which permits banks to truncate original checks, to process check information electronically, and to deliver substitute checks to banks that want to continue receiving paper checks. A substitute check is the legal equivalent of the original check and includes all the information contained on the original check. The law does not require banks to accept checks in electronic form nor does it require banks to use the new authority granted by the Act to create substitute checks." This saves everyone a lot of space for storing paper checks and obviously adds the advantages of speedy electronic transferring and processing.
Depositors who have problems should first contact the bank, or if that is unsatisfactory, contact the state consumer protection agency or attorney general's office.