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Key Laws Governing Checking Accounts
Here are some common consumer concerns and a look at upcoming changes that may affect you.
Funds availability: One way depository institutions protect themselves against losses from bad checks is to put a "hold" on certain deposits. The Expedited Funds Availability Act of 1987 sets the maximum time periods that financial institutions may hold funds deposited by check before making the money available for withdrawal. Also, the new Check Clearing for the 21st Century Act (called Check 21), which becomes effective on October 28, 2004, will speed up the check clearing process
Erroneous or fraudulent payments: In general, most of the protections against improper payments are covered by state laws, which can vary significantly. Typically, a bank is liable to its customer if it charges its customer's account for a check that is not "properly payable," although state laws also generally require customers to review monthly account statements and report any unauthorized transactions promptly. The new federal Check 21 law, which authorizes banks to pay based on a substitute check instead of an original check, includes provisions for "expedited recrediting" in cases of improper payment. And the Electronic Fund Transfer Act, which governs consumer rights and responsibilities for debit cards, also puts a premium on prompt notification of an unauthorized transfer using your card. Important: If you wait longer than 60 days after the date the bank mails the statement containing the debit card error, you could be liable for the full balance in your account plus any overdraft line of credit.
If you need proof of a payment: Your original cancelled check or substitute check with endorsements provides proof of payment, although images of checks are also accepted often. Under Check 21, your bank may provide you a substitute check that is the legal equivalent of the original check
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