WASHINGTON – The Federal Reserve announced it is shutting down three more check processing operations next month, furthering its plans to move all processing to a single center and making all checks considered "local" by the end of next year.
The Fed will move operations at its San Francisco, Los Angeles and Dallas centers to its facility in Cleveland, making all checks processed from the Cleveland operation considered local and subject to next-day availability.
The result of the Fed’s move will effect the float, or interest earned by credit unions on checks they accept. Under the Fed’s rules non-local checks have up to four days to clear, giving credit unions and banks less time to earn interest on those funds.
The Fed has been consolidating its check processing system, which until 2008 consisted of 23,000 workers at 18 centers around the country, in response to Check 21, the 2005 law that made electronic images legal tender. Plans can call for the elimination of three of the four surviving centers by the end of next year with all of the processing to be performed out of Philadelphia.
"All items are going to be local," said Mary Dunn, senior regulatory lobbyist for CUNA. That raises two issues for credit unions, she said. The loss of interest on funds availability and "whether you can get an item in enough to know if it is good."
