Check 21

Sometime in 2003, the Federal Government passed a new law which goes by the short name Check 21. It was designed to help banks transition into the 21st Century by allowing for electronic transfer of funds for normal checking, among other things. I ran into this headlong yesterday, and thought I would share this with you.

In the old days, I would write a check and mail it to the recipient to pay a bill. They, in turn, would endorse the check and mail it to their bank, or physically deposit it. Their bank would mail it to my bank and the funds would transfer from bank to bank and into the account of the recipient. The lag time between when I mailed the check and when it cleared my bank was what I called "float". Well, hang on gang, in the 21st Century that "float" time has nearly disappeared, even with a paper check.

I had mailed a check to my homeowners association company on June 4th, the day I wrote the check. They received the check on June 6, and processed it through some kind of electronic scanner which was electrically hooked to my bank and the funds were immediately credited to the homeowners association company account electronically. There was no lag time between when the company received my check and they got credit for the check.

I talked with my bank and they said that many companies now use Check 21 as a part of how they process paper checks. Apparently, as I understand from the info on the Federal Reserve site, checks may now, with the approval of the company and the banks, be processed immediately. All debit and credit transfers happen electronically, and are instantaneous.

Now the reason I ran into this headlong was that I use Quicken to keep up with my finances. And I always download my banks transactions into my Quicken account(s) on my computer. Normally when a check transaction occurs, the data about that transaction that gets downloaded from my bank includes the check number. That makes sense, doesn't it? But with Check 21 transactions, the check number did not get downloaded - just an indication that there had been an electronic transaction for a particular amount on that day to a certain party. No check number. When I saw this the first time, I thought I was going to run into a double payment for my homeowners fees: one for the electronic deduction and one for the check.

It took me 4 phone calls to my bank and the homeowners association company, but I finally figured it out. The homeowners association company had received my check for payment of my HOA fees and had processed it with my bank using the Check 21 capability. My bank showed in their records that my check, with the proper check number, was processed electronically. The fact that Quicken did not receive the check number with the downloaded transaction is a shortcoming of how Quicken communicates with my bank about checks that have undergone the Check 21 process. The bank records, which I was able to verify independently by going to my bank's web site and logging in, showed the right check number had been processed for the payment to my HOA company.

Mystery solved. Welcome to the world of the 21st Century.......