Fed Restructuring to Shorten Check-Hold Times

WASHINGTON – The Federal Reserve said it won’t shorten check-hold times under the Electronic Funds Transfer Act to facilitate the Check 21 law, but a reduction in the Fed’s check clearing operations will have the same effect. That’s because in reducing the Fed’s check processing offices from 45 in 2003 to just four by 2011, most checks will come under the two-day hold time allowed for “local” checks from the same Fed region; as opposed to the five-day hold allowed for “non-local” checks transported between regions, a Fed payments official told attendees to CUNA’s Payments Systems Conference yesterday. Louise Roseman, director of the Fed’s operations, said the Fed decided the Check 21 law is too new and implementation too sparse for the Fed to shorten hold times in order to take advantage of the expedited payments under the law. But consumers already are benefiting from the new law, which gave electronic check images the same legal standing as paper checks. “Most consumers are already getting availability for funds even faster than the law requires,” Roseman said. And the continued decrease in the Fed’s check processing offices–already down to 20 this year–will act as a de facto shortening of the hold times when the Fed moves to just four regional offices by 2011, she said.