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Congress Questions Check Holds: Letters Urge Quicker Availability

In letters sent from Congress to banking associations and officials, legislators cited concerns about check-hold times and providing availability more quickly to deposits. One letter to the associations says, "We ask you to urge your members to hasten consumers' access to their deposited funds without further prompting from the Federal Reserve or Congress."

Chairman Michael Oxley, R-OH, and three Republican Committee members from the House Financial Services Committee originated the letter which was sent to all the banking trade associations. In it the committee members wrote, "As the time period for the transportation of checks is reduced by greater electronic processing, simple fairness would seem to dictate that consumers should also realize the benefits of quicker access to their deposited funds."

The letters were also signed by the Financial Institutions and Consumer Credit Subcommittee Chairman Spencer Bachus, R-AL and Committee Members Rep. Melissa Har, R-PA, who sponsored the Check 21 Act.

While they accept the fact that actual hold periods at many banks are shorter than the time frames required by the Expedited Funds Availability Act (Reg CC), they went on to say, "However, we also believe that the reduction in clearing times should result in a corresponding reduction in check hold times."

An additional letter to Federal Reserve Chairman Alan Greenspan asked about status of a Fed study on check hold times as required by the Check 21 Act. The Federal Reserve has until April 28, 2007, to make recommendations for legislative action to address the impact of Check 21. Fed is also required to reduce check-hold times when it determines that check processing times have improved.In another action, Committee Member Carolyn Maloney, D-NY, introduced a bill requiring banks to clear consumers' deposits faster. She proposes shortening the maximum hold on non-local checks to three business days, rather than five. And increasing the threshold amount of large deposits from $5,000 to $7,500.

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 14, No. 12, 1/05

First published on 01/01/2005

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