Letters to Congress

Letter to Reps. Oxley, Bachus, Hart and Tiberi regarding check hold policies

January 10, 2005

The Honorable Michael Oxley
U.S. House of Representatives
Chairman
Committee on Financial Services
2308 Rayburn House Office Building
Washington, DC 20151

The Honorable Spencer Bachus
U.S. House of Representatives
Chairman
Subcommittee on Financial Institutions and Consumer Credit
442 Cannon House Office Building
Washington, DC 20515

The Honorable Melissa Hart
U.S. House of Representatives
1508 Longworth House Office Building
Washington, DC 20515

The Honorable Patrick Tiberi
U.S. House of Representatives
113 Cannon House Office Building
Washington, DC 20515

Dear Representatives:

The Credit Union National Association (CUNA) would like to thank you for your letter raising concerns on financial institutions’ current check hold policies in the wake of the effective date of the Check Clearing for the 21st Century Act (Check 21). We certainly appreciate those concerns and share your goals for a fair and efficient check processing and payments system. By way of background, CUNA is the largest trade association serving credit union in this country. CUNA represents about 90% of our nation’s 9,300 state and federal credit unions. Approximately 86 million consumers are credit union members. CUNA referred your letter to our Payments Subcommittee, under whose auspices this response was developed.

Credit unions are dedicated to providing their members with excellent financial benefits and quality service. This is evident by many credit unions’ liberal hold policies that were in place before the enactment of Check 21. In fact, it is our understanding that checks or share drafts, including non-local items, that are deposited into credit unions are generally available sooner than the Expedited Funds Availability Act (EFAA) requires.

Additionally, most credit union members realize benefits at the time their deposits are made and not when the credit union receives credit for the deposited funds. This is because credit unions typically pay dividends (interest) to their members when a deposit is made to an interest-bearing account and not at a later date, when they receive credit for the check. This is another example of credit unions placing a priority on members’ interests, as the EFAA, Regulation CC, doesn’t require interest to accrue on funds deposited on the day a financial institution receives credit for the funds.

CUNA agrees with your view that the benefits of Check 21 should be shared with consumers and we support current statutory consumer protections regarding check collections. As you know, Section 16 of Check 21 requires the Federal Reserve Board to study the appropriateness of check hold time periods and amount limits by April 28, 2007. This provides sufficient time for more financial institutions to participate in electronic imaging and for the Federal Reserve to study its impact on consumers. Additionally, the EFAA requires the Federal Reserve Board to monitor check collection times and to reduce hold times to as short a time as possible when check clearing times improve.

As you suggest, CUNA hopes to work with the Federal Reserve Board and provide feedback as needed on credit union check hold policies, check collection times, and the check payment system and its impact on credit union members.

In addition, we will continue to monitor the implementation of Check 21 and ensure that credit union members benefit further from any image exchange advances. We are committed to working with the Federal Reserve Board and others in the financial institutions industry to ensure a fair and efficient check processing and payments system.

Sincerely,

Celia Woodham
CUNA Payments Subcommittee Chair

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