June 6, 2011 – NAFCU Associate Director of Regulatory Affairs Dillon Shea noted that while NAFCU is generally supportive of the Federal Reserve’s proposed changes to the availability of funds and check collection, the association is concerned with the proposal’s treatment of case-by-case holds, notices in lieu of return and same-day settlement requirements.
In writing June 3 to the Fed, Shea responded to the agency’s proposal, which details revisions to Regulation CC that aim to ease the financial industry’s transition to a fully electronic check collection and return system.
The Fed is proposing to eliminate use of the notice in lieu of return – a move that NAFCU does not support. While Shea acknowledged that the notices may be used less often in an electronic system, he noted there may be times where it is the best option available for returning a check. “There seems little reason not to provide flexibility in this regard,” said Shea.
He also told the Fed that it should not eliminate provisions of Reg CC that pertain to case-by-case holds. Since it has consolidated its clearing operations into one place, the Fed maintains that the absence of nonlocal checks marginalizes the usefulness of the extended hold period for case-by-case holds. However, Shea informed the Fed that several credit unions still use such holds to protect themselves against the possibility of bounced checks. “This is a case where credit unions would prefer an imperfect instrument for protection than no protection at all,” he said.
Shea, citing efficiency and expediency, noted NAFCU’s support for requiring electronic presentation for checks that are submitted for same-day settlement. However, the association doesn’t believe the Fed should remove Reg CC provisions that allow same-day paper checks to be grouped with other paper checks. He said eliminating the provisions would simplify processing at the receiving bank, which may discourage electronic check collection.