Saturday, March 2, 2024

Supporters say it was the 9/11 terrorist attacks that inspired the “Check 21” law allowing banks to exchange data instead of paper checks. That means, starting Oct. 28, checks will clear much more quickly. They will also bounce much more quickly, for those without money in their accounts equal to the amount they’re paying.

Why 9/11? Because the attacks froze transit in the United States, making the shuffling of paper checks around the country much more difficult. And that hurt commerce.

But there’s something else working behind Check 21, officially known as the Check Clearing for the 21st Century Act: It allows banks to hire fewer people, sell check-processing facilities — including the magnificent old building in Porter Square that until recently served that purpose for Cambridge Savings Bank — and work more efficiently. It also allows allows banks to rake in cash in those bounced-check fees, up to $30 each. As the Boston Herald puts it:

By mid-2005, consumers could be bouncing 7 million more checks annually and paying an additional $170 million in fees each month, according to a banking industry source.

The newspaper also quotes Bruce Spitzer, spokesman for the Massachusetts Bankers Association, sternly warning customers not to try to “float” checks, or write them hoping to get enough money into a bank account to cover them before they’re cashed.

“Don’t play the float. The float has never been legal, it’s fraud,” Spitzer says, as though there are cadres of con artists out there purposely keeping their checking accounts low just for kicks.

The Herald article fails to ask why check bouncing fees are as high as $30 and will stay at current levels, despite the increased efficiency and cost savings from electronic data transfer. (Banks, by the way, get to keep customers’ money just as long as before, raking in even more benefit.) Congress similarly failed to demand, in passing Check 21 into law, that banks lower their bounced-check fees.

So the poorest among us, who already have trouble keeping enough money in their accounts to cover their checks, will get hit harder. Who is looking out for them? When will this country stop helping industry reward its richest and strike at its most vulnerable, especially as computerization means more and more people out of jobs?

The country is also writing some checks it can’t cash, and the bounce fee is going to suck.