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SAN DIMAS, Calif. and WASHINGTON-WesCorp employed Webcast technology, facilitated through Counter Intelligence Associates, to spread the word about H.R. 1474, the Check Clearing for the 21st Century Act, and educate credit unions on its benefits. The legislation creates a new negotiable instrument, the substitute check, which would carry equal weight with the original paper check, according to Federal Reserve Assistant Director of the Division of Reserve Bank Operations and Payment Systems Jack K. Walton II. This allows for greater efficiencies in the check system by eliminating the handling of the original paper document from the process. With check truncation, the original check is captured once, instead of the eight to 12 times it is physically handled now, which cuts out time and expense, he explained. Savings could also be realized by fewer physical locations for financial institutions that “won’t necessarily need all the brick and mortar they have today,” Walton said, as well as operational changes. One bank told him that it could save between $70 and $90 per day per ATM by imaging checks within the machine. “By establishing the substitute check and allowing for check truncation to happen earlier in the process, we can get checks cleared through the system at digital speeds rather than having to move [them] physically around the country,” Congressman Harold Ford’s (D-Tenn.) Communications Director Seth Hanlon explained. Ford, a main sponsor of the bill, was unable to attend WesCorp’s Webcast himself due to a plane delay. “There are a lot of innovations, in terms of customer service that could occur,” Walton added. For example, with customers where the institution has high confidence levels, checks could be imaged immediately and funds could be collected faster. Another plus is that few changes will have to be made to financial institutions’ current systems, Walton added. He anticipates many of the financial institutions will embrace the new law quickly, once its passed. Consumers will feel the impact of the legislation as well. While they should have quicker access to funds, that also means consumers who `play the float’-write a check knowing the funds are not available but hope they will be available by the time the check clears-will be in for a wake-up call, according to WesCorp Public Affairs Manager Sheri Ledbetter explained. Initially, she expects an uptick in bounced check fees, but that should level off, she said. Consumer protections are also included to prevent “double debits” due to re-presenting of checks that have already been presented, as well as expedited recrediting. The bill is still shifting through the legislative process. It has hit one snag regarding disclosure of the Fed’s check transportation charges that is being worked out in the bill’s conference committee. Once the House and Senate language are identical, both chambers vote on it and it goes to the president’s desk for signing. WesCorp Vice President of Item Processing Services Teresa Ward said that is not the only problem. According to her, non-truncated accounts are of concern because, even though a digit can be used to identify the item as returned to the consumer, they will need new checks. This could be a problem if the consumer mistakenly uses their old checks or if the MICR line is misread by high-speed sorting equipment. Additionally, if the consumer changed their mind and decided to go with truncation, they would need new checks all over again, Ward explained. Other practical problems include image quality standards, which are not yet finalized, and security features of paper item, such as watermarks, do not typically survive imaging, she added. [email protected]

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