Check processing before check 21 legislation Term Paper

Check processing before check 21 commandment - Term Paper Examplek 21 legislation, previous law was made in a way that banks were forced to accept Presentment that was a unique check made of penning before transferring funds to other accounts. The old Check processing system was exceedingly slow comparing to the electronic system and customers had to wait for their Check clearance for twain to three days (Bauer and Gerdes).The check clearing process before legislation 21 was complicated as it requires Federal Reserve to receive Checks from banks where they have been deposited, associate them in an organized manner, adding the amount of payment for deposited banks and delivering Checks from where there were drawn. This was the main source of income for Federal processing as forward items use to generate profits. Before legislation 21, paper Check accounted for more than 60% of the noncash payment in the year 2000. The Federal Reserve System used to process large number of paper C hecks physically, but even before the emergence of legislation 21, the paper Check processing was declining because of its complications. The customers used to face different types of problems before this legislation, and they were non properly secured against self-appointed payments of paper Checks (Wheelock and Wilson). This legislation brought new measures of safety that the previous system was unable to implement. There was a fraud case for Hauser Contracting Co. in which a plunderer obtained Check of stock that was used for paying employees. He made many Checks of payroll and withdrawal more than $24,000. These types of fraud were particularly common when paper Checks was used by the banks (Abagnale). The banks previously were not used to give any canceled Checks back to the customer, and they were only able to see the documents of Checks that were paid. Another disadvantage of the previous system was that banks were not able to processed claims made for paper Checks and the y used to take more time for investigation. The electronic Check system after