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Electronic processing of checks faster, safer


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POSTED: Tuesday, May 12, 2009

Question: I go to First Hawaiian Bank. Recently, instead of giving me my original canceled checks for my own records and income tax purposes, they're keeping them and giving me tiny copies. They won't give me my originals back. Why, and what do they do with them? I want my original checks back because I'm worried about identity theft.

Answer: It's not just First Hawaiian, but an estimated 99 percent of banks here—as well as a majority on the mainland—that have moved to the Electronic Check Image Exchange system.

The new system is said to be more efficient for banks and more secure for consumers.

The federal Check Clearing for the 21st Century Act (or Check 21 Act) allows banks to electronically exchange digital images. The check images are considered the legal equivalent of the original checks.

This new method of processing and clearing checks means consumers won't be getting back the originals anymore. Neither will the bank where the consumer has his or her checking account, said Gary Fujitani, executive director of the Hawaii Bankers Association.

The association announced the adoption of the Electronic Check Image Exchange last October, saying most Hawaii banks were expected to have their new systems in place by the end of March.

There were three driving issues that prompted the move among local banks, which process nearly half a million checks a day, Fujitani said.

The work to process checks was labor-intensive and inefficient. In eliminating the need to handle paper checks multiple times, the process became more cost-effective and efficient, Fujitani said.

The problem with paper checks also was in transporting them from one bank to another.

What really drove this for the local banks was the Sept. 11, 2001, terrorist attacks when, “;all of a sudden, air transportation was no longer available,”; Fujitani said.

There were delays in getting checks from the neighbor islands to Oahu, and from Hawaii to the mainland. Hawaii banks realized they needed a better way to clear checks if air service was disrupted again, Fujitani said.

The third driving issue was identity theft. Fujitani says getting rid of paper checks, which are handled multiple times by multiple people, results in a more secure process. Clearing checks electronically means “;it basically goes from one computer to another computer without the intervention of people in between.”;

Also, the chance of mail theft or someone accidentally getting somebody else's checks is eliminated, Fujitani said. Another benefit: You don't have to store your checks anymore.

The process now is for banks to archive images of the checks, then to shred the originals, typically after about 30 days. Banks will store the images for up to seven years, Fujitani said.

One thing consumers are being advised: Make sure there are sufficient funds when writing a check, because checks are clearing much faster, reducing the “;float time.”;

Mahalo

To a wonderful young man for helping my 85-year-old mom, Kap Sun Song, on a rainy April morning on Kamehameha Highway in Kaneohe. He walked with my mom with his umbrella to the bus stop, then gave her his umbrella and left in the rain. A big mahalo and may the Lord bless you!—The Song family


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