This piece of legislation would not be necessary if consumers trusted their banks to pass on to them the benefits of automating the payment process. Banks can also calm consumer fears by clearly communicating what theyre doing as far as generating and exchanging IRDs.
Check 21 merely required banks that receive IRDs to treat them like paper checks. It did not require banks to generate them, but consumer groups have reacted as though every paper check in the universe is about to be destroyed. Many consumer groups also assume that banks are using the law just to deduct money faster. That feeling could be offset should banks make public their policies on speeding deposits as well.
One section of Maloneys proposed law that addresses a real consumer need is the one that covers Fees for Services not Requested. In this section, the law states, "No depository institution may impose any fee for paying any check drawn on an account in spite of a lack of sufficient funds in the account to pay such check or any similar activity (commonly referred to as `bounce protection) unless the accountholder has affirmatively requested such service."
In English, the law is asking banks to not charge customers for services they havent explicitly signed up for, specifically overdraft protection. Such protection gets costly when the bank covers a payment that would have otherwise bounced, charging not only a bounced check fee but also a fee for the funds used to cover the check.
Check 21 will certainly boost the acceptance of electronic check images, but the systems required to generate and exchange those images are still in development and standards are still evolving. As this evolution goes on, consumers would be well-served by banks that clearly explain what theyre doing, and publicize the ways that speeded payments are helping.
The alternative is a web of new laws that will control the evolution of IRD exchange. Since most regulations end up on the books in response to abusive practices, the banking industry can do itself a favor by avoiding the perception of any action that could be interpreted as hurting consumers. Clear information and consumer education are key to avoiding excessive layers of rules and regulations.
Bankers, start your education engines.
Theresa Carey is the editor of eWEEK.coms Finance Industry Center. Shes been writing about financial technology issues since 1990 for a wide variety of publications, including PC Magazine, Newsweek, Fortune and Fortune Small Business. She is also a contributing editor to Barrons and writes its "Electronic Investor" column. She can be reached at [email protected]
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