WASHINGTON (2/12/14)--The Federal Reserve must minimize the costs and impact on credit unions, corporate credit unions, and other payment providers if earlier posting times for automated clearing house (ACH) debits and commercial checks are imposed, the Credit Union National Association said in a letter to the regulator.
CUNA on Tuesday released a pair of comment letters addressing the Fed's proposed changes to its Payment System Risk Policy (PSR), and related changes to Regulation J.
The proposed Fed PSR changes would move the posting of ACH debits, processed by the Fed banks' FedACH service overnight, up to 8:30 a.m. (ET) from 11 a.m. (ET) to align with the posting of ACH credits. The proposal would also move the posting time for receiving most commercial check credits for deposits and debits for presentments to 8:30 a.m. (ET) and establish two other posting times of 1 p.m. (ET) and 5:30 p.m. (ET), and make other related changes.
Providing additional information and resources, and granting credit unions and other payment providers adequate time to implement these proposed changes, are two ways the Fed could improve it proposal, CUNA Assistant General Counsel for Regulatory Research Dennis Tsang wrote.
These earlier posting times could result in credit unions and others having lower Fed Bank account balances, and could force them to incur additional daylight overdrafts and increased fees.
"To minimize the impact of the proposed changes, financial institutions would have to pledge additional collateral (if eligible for intraday credit), arrange for earlier funding, or hold higher balances in their Fed Bank accounts," Tsang wrote.
The earlier posting times could also disproportionately impact smaller financial institutions with less than $10 billion in assets. Such institutions are generally net receivers for ACH debits as receiving depository financial institutions, and are likely to have lower account balances due to earlier postings for commercial checks, Tsang said.
CUNA also commented on related changes to Regulation J in a separate letter. The Reg J proposal would require institutions receiving Fed Bank checks to make the proceeds of settlement for those checks available as soon as one half-hour after receiving the checks and by as early as 8:30 a.m. (ET). Currently, these requirements are as soon as one hour after receiving the checks and by as early as 9:30 a.m. (ET), respectively.
CUNA is concerned that these changes will force credit unions and others to increase their account balances to settle presented checks, Tsang said.
For both CUNA comment letters, use the resource links.