PR for Check 21

Northwestern Financial Review, Oct 1-Oct 14, 2004 by Bengtson, Tom

Check 21 is coming and the public doesn't seem to know what to make of it. While bankers have been studying the details of the Check Clearing for the 21st Century Act for months, many consumers are just now beginning to hear about the law, and the information they are getting is often faulty.

A caller on a radio talk show told an NPR audience that "a new banking law" allows the government to "keep a database of every check we write." The radio host didn't bother to correct her. A report on ABC radio news told listeners that Check 21 is likely to mean more fees for customers and more profits for bankers. Consumer Reports magazine told readers in its August edition that Check 21 is likely to result in an increase in bounced checks. It urges customers to ask their bank for substitute checks and not to agree to truncation on their checking account.

There is a lot of flat-earth thinking out there about the meaning of Check 21, and the banking industry should take this opportunity to control the message. Now is the time for the industry to articulate the simple facts about this new law: Check 21 will improve the efficiency of the payments system; it will further protect the economy against terrorist attacks; the government is not keeping a national database of checks; there is no reason for people to bounce more checks; and the vast majority of banks aren't making any money on this.

It would be a good idea for the banking industry to track the number of bounced checks. The Consumers Union, which publishes Consumer Reports, says on its web site that one expert expects consumers to bounce seven million more checks and pay an additional $170 million in overdraft fees. The web site provides no basis for such speculation. The web site also says the banking industry will save $2 billion and complains that consumers won't see any of that money. I don't know any community bankers who expect to save a nickel on any of this.

Consumers have weathered transitions in the payments system before, and always benefited. The implementation of Reg CC, which tightened check clearing deadlines, did not lead to millions of bounced checks. The introduction of debit cards was a welcome development for most consumers. And many banks began truncating checks a long time ago. Millions of consumers have painlessly made the transition to imaging on their old checks.

With a little reassurance, the banking industry can calm any public hysteria over Check 21; but if the industry doesn't take its role as educator seriously, the level of public ill-will toward banks will only grow.

By Tom Bengtson, Publisher