Friday rant: New bank rules will effect the economy

This story has been grossly underreported, which is just fine with the banking industry. Perhaps it’ll get the attention it deserves after the election, ’cause frankly folks, this, this THING known as the Check Clearing for the 21st Century Act (aka Check 21) is bullshit. The “new golden rule” is he who has the gold makes the rules, and that’s what’s happening here.

Designed to advance a paperless banking system, Check 21 means no more cancelled checks in your bank statement, because it allows banks to replace a real check with a facsimile thereof. That makes electronic banking quicker, and writing checks will be almost the same as using a debit card.

That’s because it will shorten “float” — the window between the time a check is written and the time it is cashed. Each day, billions of dollars exist in this “float,” and much of that is from poor people who’ve learned how to stretch their income by a day or two or three. Yeah, it’s illegal, but it also has existed since banks first brought about the “luxury” of checking accounts. And it’s easy to get black and white about this when your paycheck isn’t due in two days and you need some food.

Check 21 eliminates the float by tapping your account for the money written on your account within 24 hours. Consumer experts are predicting a landslide of bounced checks and overdraft charges as people “get used to” the new system. For consumers — especially the poor — much of the float exists between the time they deposit that paycheck and when checks are drawn off of it, and that’s where they’ll get hurt even while being honest.

That’s because while the new rule speeds transfers between banks, it does not require those banks to put the money into their customers’ accounts any faster. WTF? So when I write a check, they tap my account within 24 hours now. But when somebody writes me a check, the same rules don’t apply. Currently, banks credit local checks to their customers accounts within two days and out-of-town checks within five days. Are you beginning to see the problem?

I don’t care that the industry is “doing all it can” to speed up the transfers, the reality is they don’t have to. And what’s their incentive anyway?

There are billions of dollars at stake in this, and the banks only stand to gain from you and me (once again) holding the short straw. I’m not smiling.

Comments

  1. Banks credit your account immediately if you don’t have the credit record of someone who floats checks, y’know.

    Don’t blame those nasty ol’ banks about the fact they rewards honest folk and not dishonest folk, k?

    Yeah, it’s DISHONEST, which ya says and skates right over, so don’t go whining about not gettin’ way wid it nomore.

    The poor ol’ poor? This change helps the HONEST ol’ poor as muchas the HONEST un-poor.

    Don’ spend ya money til yas earned it, like all honest-uns. Honesty and dishonesty ARE black and white. We might need more compassion in this world, and better social support, and all sorts of reforms. What we don’t need is more dishonesty, more lying, more letting someone else pay your way (which is what check floating IS, and don’t kid yourself otherwise).

  2. Like, writing in bad dialect, is waaay cool. You’re all, like, “That law is bad to the bone!” And I’m all, “That law is totally gnarly! Bogus!” And I, like, think it totally rocks to like, not write in total L7 English, but I’m all like, “the kids will dig it if I’m all, like, like not L7, knowwutImean?”

  3. Dear Holly,

    Recovery programs for people with low self-esteem (for whatever reason) offer 2 basic learnings:
    1. YOU are loved and accepted. It is your actions that are not acceptable.
    2. If you breach someone’s trust, you have to earn it back.

    These two learnings give the recovering person the opportunity to make new choices. And those choices can offer any offended party (someone who has been cheated, for example) the opportunity to make a new choice: to trust, again.

    These are the basic dynamics of human interaction.

    Mr Heaton speaks of individual power, accountability and honesty. Yet he tells us in this post that “the poor” have reasons for kiting checks. Reasons, yes; Excuses, no.

    “The poor”, “the drug addict”, “the power addicted executive” are all loved, even while their actions are unacceptable.

    Check kiting is dishonest. It is unacceptable.

    Check kiting is dishonest. If you do it, you have the opportunity to make a new choice. If your bank mistrusts you, you have the opportunity to demonstrate honesty and re-earn their trust.

    I can put that in whatever dialect you like. I do not know why check kiting is suddenly a “not black and white” issue for Mr Heaton. His post is an incongruency, and I’m pointing that out.

    Best wishes to you.

  4. Hannah,

    Two things. One, regarding the poor, it’s easy to be black and white until you’re confronted with grey. I believe even Bill W. would concur with that.

    Two, my point is that if the banking system can electronically “hit” a personal checking account within 24 hours of the check being written, why cannot deposits be treated the same way?

    This is not about honesty or dishonesty. It’s about banks having their cake and eating it too. Under this system, a person can be honest and still be punished, because money coming into an account is treated differently than money going out.

    When I receive compensation in the form of a check, I believe it’s a done deal, and I’d like to think the banks would view it likewise. They don’t, and that’s the problem.

  5. Come on you all know that Big Money is the real power in DC .
    the Banking Sys is the real power in Washington You as a person can not make a loan to say your pal and make him pay you 10% interest on the loan that is illegal the max you charge is 5%
    Now on the other hand a Bank can and in some cases will charge up to 35% as set in the law there is no limit to what a Bank can charge you in iterest . so you right he with all the money makes all the rules and you bet you sweet ass its the Banks .

  6. Come on you all know that Big Money is the real power in DC .
    the Banking Sys is the real power in Washington You as a person can not make a loan to say your pal and make him pay you 10% interest on the loan that is illegal the max you charge is 5%
    Now on the other hand a Bank can and in some cases will charge up to 35% as set in the law there is no limit to what a Bank can charge you in iterest . so you right he with all the money makes all the rules and you bet you sweet ass its the Banks .

  7. Terry,

    Money in is INSTANTLY if you have a good history with your bank.

    So, actually, it IS about honesty.

    Open an account, don’t break the contract under which you entered that account, and within 2 months your bank will be crditing your checks WHEN DEPOSITED.

    There is no gray, if you do not allow your own ethics to invent gray.

    There are times for constructive resistance to the system, but this is NOT an example of “the noble poor” rebelling for change. It’s just dishonesty, excused as “the poor poor”.

    If you can’t cover a check, don’t write it.

    If you want to be able to write checks quicker, don’t breach the trust of those on the other side of the contract.

    Don’t excuse dishonesty with more bank bashing.

  8. Money in is INSTANTLY if you have a good history with your bank.

    I’m sorry, Hannah, but this is false. You may have a good relationship with your bank or banker, but we’re talking about rules here.

  9. We’re talking about practice.

    I’ve rebuilt a bad credit history.

    I have this experience.

    Yes, I DO have a good relationship with my bank. I have had this relationship with many banks in many countries. I’ve earned their trust.

    I’ve rebuilt the reputation of an account which did not have a good relationship with its bank, too. A “user” in every sense of the word who kited checks and told customers “the checks in the mail”, who bounced and ducked.

    That behavior has consequences. I’ve worn the consequences of such behavior, and reversed them.

    Is this a blind spot or a sore spot?

    Every bank I have ever dealt with has credited deposits immediately for good customers. If you have never had that experience, I’m sorry, for you and your bank.

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