More Bad Checks In Sight?
In 1996 about 18 billion checks were written at retail points-of-sale worth an estimated $635 billion. Of these checks, $13.6 billion were not good at the time that they were written and $8.2 billion were eventually dishonored and required collection intervention.
Buried in a torrent of requests before the new Congress is one from the Federal Reserve that would give banks an extra day to clear local checks, moving the time from the current two days to three days.
Banks
have been screaming for some time that the previous Expedited Funds
Availability Act forced them to provide access to funds before they
were sure that the check was in fact good. In 1996, about 18 billion
checks were written at retail points-of-sale (approx. 28% of U.S.
checks) worth an estimated $635 billion. Of these checks, $13.6
billion were not good at the time that they were written and $8.2
billion were eventually dishonored and required collection
intervention
Consumer advocates believe that the measure, if approved, could cost consumers and retailers millions of dollars in bounced-check fees, and is yet another way for banks to make money at unconscionable levels.
The issue hits a hot button with consumer groups, which believe checks deposited in consumers' bank accounts should quickly be made available to them.
This Fed request is expected to move through congress with a swift approval.1
Prior to the Expedited Funds Availability Act, 60% of all checks written were not good at the time they were written. Today this number is 40%. The Fed is asking Congress to take us back to the old days-more bad checks in sight?
1 United States Check Growth Study, Results of 1996 Research, Copyright 1996.
