CHECK CLEARING FOR THE 21st CENTURY

ALAMEDA, Calif., September 1, 2004 — There is something special about the number 21. A 21-gun salute represents top honors. We officially become adults on our 21st birthdays. The perfect blackjack hand adds up to 21, too.

The latest addition to the list is Check 21. Check 21, short for the "Check Clearing for the 21st Century Act," revolutionizes banking. The act, effective October 28, allows financial institutions to process checks electronically. This represents a significant change from old rules requiring banks to exchange original paper copies of checks except where prior written agreements allowed electronic information transfer.

In spite of technological advances, most checks continue to be transported to country, before they can be cleared. Reliance on ground and air transportation systems results in delayed transactions caused by events as extreme as terrorist activities or as mild as bad weather. Customer funds are tied up until checks clear.

The slower process also opens a door for check fraud and hampers effective fraud detection by banks. In 2001, attempted check fraud at U.S. banks totaled over $4.3 billion with actual bank losses coming in at $698 million. Under Check 21, however, check images can be sent anywhere in seconds. Efficiency is improved, and overhead costs are reduced. Many financial institutions have implemented fraud detection methods that interface with electronic check processing systems. Faster detection increases the chance of catching perpetrators and minimizes the impact to their victims' accounts.

Where proof of payment is required, Check 21 allows a substitute check, also called an Image Replacement Document (IRD), to be provided by banks. The substitute check, a copy of the original check's front and back, including endorsements, will become the legal equivalent of a paper check. Customers will have the right to file a claim if an error is made in the substitute check.

So, what does this change in banking practices mean for you?

Alameda Power & Telecom still will accept checks for payment of telecommunications and electric services, but be aware that these checks will clear noticeably faster, potentially within hours.

Your bank statement may include a mix of original cancelled checks and substitute checks or cancelled checks may no longer be returned to you. Remember that you can always request a substitute check when you need proof of payment.

The Federal Reserve Board will publish new Check 21 guidelines later this year. If you have any questions about Check 21, contact your bank, credit union, or financial institution for more information.