Check 21 Nearing, But Many CUs Are Refraining From Tech Investments

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The deadline for the Check Clearing for the 21st Century Act (Check 21) is 10 days away, but a number of credit unions are still refraining from investing in new technologies.

For the past year, suppliers have ramped up Check 21 marketing to CU clients, urging them to perform due-diligence and consider check imaging solutions that could support the benefits of Check 21.

But only about 5% of the nation's credit unions and other financial institutions are immediately adopting new technologies, according to the American Bankers Association.

Many credit unions say it's just to soon to tell, and they are responding to advanced technologies with a 'wait and see' approach.

"Every vendor that could touch a technology associated with Check 21 is really excited to sell it, but we want to know for sure that the technology is equipped to handle Check 21," explained Jim Morrell, vice president of Information Services at $285-million iQ Credit Union in Vancouver, Wash.

That means many credit unions are "waiting for final regulations to be determined," said Jenifer Hale, project manager at $550-million Memphis Area Teachers' CU (MATCU) in Memphis, Tenn. "We don't want to sign an agreement with a vendor that doesn't meet our needs."

The systems that handle image exchange data may evolve as Check 21 is interpreted, added Morrell. "Until we really understand how check processing will change, we're hanging tight."

Check 21, which goes into effect October 28, enables check truncation by authorizing substitute, imaged checks at the point of deposit. Check images should carry less of the risks associated with the transportation, fraud, theft and terrorism of paper checks.

Many credit unions, including MATCU, already create and store check images. They are also prepared to accept substitute checks. But they don't have the advanced technologies that will enable image exchange with clearinghouses, credit union corporates, or other financial institutions.

"We don't create substitute checks, but we do capture images of the front and back of every check," said Ross Ramsey, vice president of marketing at $175-million Monterey CU in Monterey, Calif.

In fact, as far as advanced technologies go, there's nothing credit unions must do this year to comply with Check 21, Brian Musser told The Credit Union Journal in March. Musser is chief financial officer at $400-million Purdue Employees FCU in West Lafayette, Ind. and board member of Mid-America Payment Exchange, an Automated Clearing House association. "We're going to try and downplay this," added Ramsey.

In that spirit, a number of credit unions interviewed by The Credit Union Journal are taking the "wait-and-see" approach to image exchange technologies.

"We don't want to be the first to forge new territory," said Hale at MATCU. "We're waiting to see the common practices and formats. We're really in the fact-finding stage and aren't looking to move drastically until next year."

By then, Hale hopes that Check 21 will have gone through several interpretations, and that the NCUA with input from the trade associations will have issued guidance.

"Then we'll go a step further and not only image our checks but capture the MICR line as well" to facilitate superior Check 21 benefits, Hale said.

Though credit unions may be holding off on advanced technologies, all of the credit unions interviewed for this article were taking an active approach to educating members and employees about the changes Check 21 will bring, as well as updating refund, denial and reversal notices and funds availability disclosures.

"We're meeting the basic requirements of notifying and educating members and preparing our notices and disclosure requirements," said Patti Moser, Financial Services Platform administrator at $360-million Whatcom Educational CU in Bellingham, Wash.

Credit unions are expected to dive into Check 21 technology as costs and other incentives begin to support the business case. Case in point is Spokane, Wash.-based Numerica CU.

"We do not have any immediate plans to implement new Check 21 technology," explained Gerry Neff, manager of Technical Services at $500,000 Numerica Credit Union. "We are, however, actively looking at options for branches that are in remote locations. In the Spokane area we currently courier checks to a local processing center. For outlying branches checks are deposited to our account with a national bank. We are looking at acquiring Check 21 scanners for the remote branches to circumvent the bank deposit relationship."

CUJ Resources

For more info on the sources in this story:

* Cutting Edge FCU at

* IQ CU at

* Monterey CU at

* Numerica CU at

* Purdue Employees FCU at

* Whatcom Educational CU at

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