FED Considers Check Hold Changes

Regulation CC Takes Center Stage Again
Non-local Checks To Drop To Four Days
The Federal Reserve Board asked for comments on a proposal that would shorten funds availability schedules for most categories of non-local checks from five business days to four business days.

However, the proposed Fed Regulation CC changes would allow banks to retain the five-day schedule for categories of checks for which they can certify they do not receive a significant number of returns in four days.

The Fed has been looking for ways to reduce availability schedules for nonlocal checks without compromising bank security. It has considered approaches ranging from categorizing the almost 2,000 possible pairs of check processing regions and basing schedules on those categories to creating three categories nationwide based on the availability zone of paying banks.

Periodically Collect Data
The self-certification in this most recent proposal would require individual banks to collect data periodically that would certify that they do not receive two-thirds of a particular category of checks within four days.

Therefore, availability would be based on actual return experiences.

The bank's primary supervisor would be responsible for reviewing the self-certification and supporting data.
It has been our experience that many banks, particularly small banks, in order to stay competitive and provide the same level of service as the large banks, have consistently gone to next day availability. Some even provide same day availability.

If you are one of them, you might want to take a long look at this proposal. Your return items area may already be telling you there is an increase of returned counterfeit or fraudulent items hitting you.

Adopting this proposal means in order to protect yourself by using the five day hold, you'd have to collect data and justify the longer hold - and satisfy your examiner with your conclusions. You'll still be able to put on an exception hold - but either way, it's extra work and worry.

Copyright © 1999 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 9, No. 2, 2/99