News

Check 21 passes House, could boost use of imaging technology at ATMs

January 26, 2004

CHARLOTTE, N.C. -- Pete Frank, head of Wachovia Corp.'s check-processing operations, is heartened by the recent House passage of the Check 21 Act.

If it passes the Senate as well, the legislation could eliminate much of the paper that flows through Wachovia's check-sorting equipment in Charlotte and at 13 other sites, according to a report in the Charlotte Observer.

The House passed a bill 405-0 on June 5, and a Senate subcommittee is expected to consider similar legislation in coming weeks.

If Check 21 becomes law, banks could exchange digitized images of canceled checks or substitute checks rather than the checks themselves, which would dramatically reduce processing costs. Although banks have been increasing their electronic processing of canceled checks for years, legally they still are required to physically return checks unless they have special agreements with other banks and customers.

Industry officials believe that check processing costs could be cut in half, saving as much as $2 billion under one estimate, according to the Charlotte Observer.

Changes in check processing already are underway. Many banks ask customers to accept digital images online or in their statements, or require them to pay fees to receive the originals. And as consumers favor debit and credit card transactions, check use has started to decline, although it remains the most popular form of non-cash retail payment.

Last year, nearly 40 billion checks were written in the United States, down from about 50 billion in 1995, according to a Federal Reserve study. Citing those statistics, the Fed, the nation's largest check processor, said in February that it plans to cut 400 processing jobs nationwide and close some facilities.

Earlier this year, according to the Observer, Bank of America tested ATMs in Charlotte that accepted deposited checks directly into the machine, taking digital images on the spot and printing them on the receipts. The use of imaging technology at ATMs could become more commonplace with the passage of Check 21.

(See related story Improving ATM deposits)