October 23, 2004 V.I. consumers will notice a change in the canceled checks in their monthly bank statements beginning Thursday, Oct. 28, according to Cassan Pancham, president of the Virgin Islands Bankers Association.
"Whether they currently receive the originals or just images of their canceled checks, Virgin Islanders will find that at least some of the checks have been replaced with 'substitute checks,'" Pancham said in a press release.
President George W. Bush signed the "Check Clearing for the 21st Century Act," also known as Check 21, one year ago. The new legislation streamlines check processing without changing the way bank customers write checks. Check 21 requires banks and their customers to accept paper reproductions of original checks known as "substitute checks," Pancham said.
Check 21 allows banks to exchange images electronically, rather than transporting the physical checks to the paying banks. Before Check 21, image exchange could occur only if the banks involved had a prior written agreement.
Torn Bolt, Counsel to the Bankers Association, noted that "currently, most checks must be physically transported across our islands or across the U.S. mainland before they can be cleared. The new law will foster the exchange of check images that can travel electronically allowing for more efficient processing, less overhead expense and increased fraud prevention."
Customers will still have proof of payment. "Images of checks have been accepted as proof of payment in our courts and with the IRS for decades," Bolt said. "In fact, a majority of bank customers already have their original checks withheld from their statement and use images to prove that they paid for something," he said.
Check 21 does not mandate electronic check processing; it simply makes it possible. For the immediate future, the members of the Virgin Islands Bankers Association will continue to clear checks through the Association's Clearinghouse operation. Many Virgin Islands banks have begun the process of converting to a check imaging system, Pancham said.
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