Fed Makes Pledge To Speed Process On Bounced Checks
WASHINGTON -- The Federal Reserve, moving to implement a new law limiting how long a bank can hold a check, promised also to expedite the processing of bounced checks.</br></br>The changes covering returned checks will cost the industry an estimated $30 million in 1988, but are designed to help banks comply with a new law limiting the time a bank can hold a deposited check before crediting it. With some exceptions, the law requires payment after three business days for local checks and after seven days for out-of-town checks, starting Sept. 1, 1988. Two years later, the delay narrows to two and five days, respectively.</br></br>As the bill urged, the Fed is proposing additional procedures to address banks' concerns that checks they cash within the deadlines may later bounce. The Fed staff said that some bad checks won't be returned to the banks that cashed them in time to meet the deadline, but that the proposed improvements would reduce that number.</br></br>The proposal calls for Federal Reserve Banks to process any returned check and send it directly to the bank on which it was drawn. Currently, those banks process only the returned checks that they have forwarded for payment, and often return them through a chain of banks.</br></br>As for banks and thrift institutions, the Fed proposal would require that they return bounced checks by the same method they use to send out checks for payment from other banks. Currently, some banks and thrifts return bounced checks by mail, while using courier services for other checks.