ACB: Press Releases

Contact:	Robert Schmermund (202) 857-3104 Jim Eberle (202) 857-3145	Jim Eberle (202) 857-3145 (work) (703) 893-2593 (home) [email protected]	For Immediate Release September 25, 2002
E-mail: [email protected]

BANKING, FINANCIAL SERVICES TRADE GROUPS SUPPORT PRINCIPLES OF CHECK CLEARING LEGISLATION

Press Release Tools
	E-mail This Press Release
	Printer-Friendly Format

Joint News Release

America’s Community Bankers
American Bankers Association
Consumer Bankers Association
The Financial Services Roundtable
Independent Community Bankers of America

Contacts: ACB — Robert Schmermund, (202) 857-3104; ABA — John Hall, (202) 663-5473; CBA — Fritz Elmendorf, (703) 276-3879; FSR — David W. Liddle, (202) 289-4322; ICBA — Viveca Ware, (202) 659-8111.

WASHINGTON, D.C., Sept. 25, 2002 — The five major banking and financial services trade associations today expressed their united support for legislation to promote increased efficiency and potential cost savings through greater use of check truncation.

“The banking and financial services trade associations believe that removing the legal impediments to the expanded use of electronics for check clearing and settlement will improve the efficiency of our nation’s payments system and provide benefits to consumers as well as banks,” said Curtis L. Hage, testifying at a hearing of the House Financial Institutions Subcommittee.

Hage was representing America’s Community Bankers, of which he is chairman, and the American Bankers Association, the Consumer Bankers Association, The Financial Services Roundtable and the Independent Community Bankers of America. Hage is also chairman and CEO, Home Federal Bank, Sioux Falls, S.D.

The trade groups “support the general principles” outlined in the Check Clearing for the 21st Century Act “to facilitate innovation in the check collection system without mandating receipt of checks in electronic form,” he said.

The bill was introduced by Reps. Michael Ferguson (R-N.J.) and Harold Ford (D-Tenn.). It is based on recommendations of the Federal Reserve Board’s Payments System Development Committee, with input from the banking and financial services industry, consumer groups, check clearinghouses, processors and others.

“We believe that by providing financial institutions with clear authority to use substitute checks to reach banks and their customers not currently participating in check image programs, Congress can help drive significant cost savings and efficiencies that will benefit both customers and financial institutions,” Hage said.

The proposed legislation would allow a collecting bank to remove, or truncate, the original paper check from the check collection or return process. “The proposal would enable the entire banking industry to use electronic images to process and clear checks,” Hage said.

For banks choosing to continue processing paper checks, the proposal allows for creation of a substitute check that would retain the legal equivalence of the original check. Hage noted that substitute checks “must adhere to rigorous standards” requiring that the document accurately represent the original and can be processed in the same way as the original.

“Most importantly,” said Hage, “the proposal does not require the banking industry to adopt a fully electronic check clearing system; rather it provides the industry with the flexibility to adapt to electronic check clearing over time without interfering with the existing paper check process.” He recommended a shorter effective date than the bill’s 2006.

Hage also recommended retaining the check collection system’s existing body of law and regulation. He expressed concern over the bill’s proposed expedited recredit provision, which would allow a consumer suffering a loss from a substitute check to receive a recredit of up to $2,500 within 10 days of the claim.

“The banking and financial services trade associations believe this provision is unnecessary and may result in unintended consequences,” said Hage. “Today, banks respond to customer claims of check fraud or processing errors in a timely and effective manner. Complaints are rare.”

Hage added: “Complicated new recredit procedures would only serve to confuse customers, create compliance headaches for banks and expose banks to potential new sophisticated fraud schemes.”

America’s Community Bankers is the national trade association committed to shaping the future of banking by being the innovative industry leader strengthening the competitive position of community banks. To learn more about ACB, visit www.AmericasCommunityBankers.com.

-30-