WASHINGTON NAFCU called on the Consumer Financial Protection Bureau on Wednesday to extend the two-day hold period on personal checks for another day, in order to better detect fraud.
In a letter to CFPB Director Richard Cordray, NAFCU asked that the terms of the Expedited Funds Availability Act, known as Reg CC, be amended to allow for increased check holds. The CFPB is working with the Federal Reserve on amendments to Reg CC, which are expected to be finalized in August. Fed Chairman Ben Bernanke was copied on the Cordray letter.
While Reg CC requires a credit union to make personal checks available for withdrawal no later than two business days after the check is deposited, a credit union will not know until after it makes the funds available whether the check is counterfeit or if there are insufficient funds, according to NAFCU. A check deposited on Monday must be made available when the credit union opens for business on Wednesday. While the funds are available, however, the credit union will not be informed by the Federal Reserve that the check is not valid until 11:00am on Wednesday.
“NAFCU believes that this places both the credit union and the member in undue risk and requests that the Consumer Financial Protection Bureau work with the Federal Reserve Board to increase the number of business days a credit union can hold a check from two to three days,” wrote Carrie Hunt, NAFCU’s general counsel.
In addition, a cashier’s check or money order must be made available the next banking day after the day it was received, noted Hunt. “Unfortunately, with the increased availability of advanced technology to create counterfeit documents, including cashier’s checks and money orders, the next-day availability rule is proving to be outdated and unintentionally increases risk exposure to consumers and credit unions alike. Both consumers and credit unions are vulnerable targets of criminals that aim to take advantage of the combination of this rule and advancements in technology.”
To reduce the increased risk, NAFCU urged the CFPB to work with the Fed to allow credit unions to hold cashier’s checks or money orders.
