New Law Hastens Check Payments

Check processing gets an overhaul next month, streamlining the system but increasing the odds that people will bounce checks.

Check 21, as the new federal law is called, will allow any bank or party involved in processing a check to convert it into an electronic image. That eliminates physical handling of paper checks as that image is then electronically shuttled from bank to bank.

That should speed the entire check-clearing task, eventually whittling to perhaps a day a process that can take a week if the actual check is sent to the farthest ends of the country.

If you’re the business or person who has received the check, this is good news because that lag time, or float, has tightened. But it’s not so good for people who knowingly write checks for more money than they have in their account, hoping that by the time the checks clear they’ll have made a deposit.

“Everything is getting faster,” said John Benson, a vice president at Hills Bank and Trust Co. in Hills. As far as the float goes, he said, “Those days are gradually winding down.”

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