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 April 3, 2003
E-mail: [email protected]

BANKING INDUSTRY SUPPORTS PRINCIPLES OF ELECTRONIC CHECK CLEARING LEGISLATION

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Joint News Release
American Bankers Association
America's Community Bankers
Consumer Bankers Association
The Financial Services Roundtable
Independent Community Bankers of America

Contacts: ABA — John Hall, (202) 663-5473; ACB — Robert Schmermund, (202) 857-3104; CBA — Fritz Elmendorf, (703) 276-3879; FSR — Jimmy Williams, (202) 289-2409; ICBA — Viveca Ware, (202) 659-8111.

WASHINGTON, April 3, 2003 — The five major banking trade associations today expressed their united support for legislation to promote increased efficiency and potential cost savings through greater use of check truncation.

“We believe that legislation to sanction check images or “substitute checks” will facilitate electronic check processing that will produce significant cost savings, efficiencies and new consumer conveniences, to the great benefit of both consumers and financial institutions,” said Danne Buchanan, testifying at a hearing of the Senate Banking Committee.

Buchanan was representing the American Bankers Association, America's Community Bankers, the Consumer Bankers Association, The Financial Services Roundtable and the Independent Community Bankers of America. Buchanan is also executive vice president of Zions Bancorporation in Salt Lake City.

The trade groups support the general principles outlined in the Federal Reserve Board's check truncation proposal, which would allow a collecting bank to remove – or truncate – the original paper check from the check collection process and enable the entire banking industry to use electronic images to process and clear checks.

The Federal Reserve Board's Payments System Development Committee submitted the proposal with input from the banking and financial services industry, consumer groups, check clearinghouses, processors and others.

“Because of current law, paper checks generally must physically move by train, plane and automobile from the bank of first deposit to the paying bank,” said Buchanan. “Under the Fed proposal, no longer would a California bank have to ship a check drawn on a New York bank across the country for clearing, processing and settlement.”

The new electronic check-processing proposal has the potential to streamline the collection and return of checks, reduce processing costs and minimize the effect of unexpected disruptions to air and ground transportation systems.

“Consumers will have earlier access to their funds and faster, more convenient access to information about their check transactions,” said Buchanan.

“Any bank in the process – C as well as the check writer – could demand that items be reconverted from electronic form into a paper image or “substitute check,” complete with back and front images,” he said.

Importantly, the proposal does not require the banking industry to adopt wholesale electronic check clearing; rather it provides flexibility to adapt to electronic check clearing over time without interfering with the existing paper check process.

Buchanan recommended retaining the check collection system's existing body of law and regulation. He expressed concern that the bill's proposed expedited recredit provision would leave banks vulnerable to fraud, because it would allow a consumer reporting a loss from a substitute check to receive a recredit of up to $2,500 no later than one business day after the claim.

“Complicated new recredit procedures would only serve to confuse customers, create compliance headaches for banks and expose banks to new sophisticated fraud schemes,” said Buchanan. Banks already must respond to customer claims of check fraud or processing errors in a timely and effective manner, he said.

“We believe that the body of law and regulations that has developed around existing check clearing processes is both effective in protecting consumers and minimizing the banking industry's exposure to fraud,” said Buchanan.

About the Represented Organizations

American Bankers Association

The American Bankers Association brings together all categories of banking institutions, including mutually-chartered savings banks and savings associations, to best represent the interests of the rapidly changing industry. Its membership ©¤ which includes community, regional and money center banks and holding companies, as well as savings associations, trust companies and savings banks ©¤ makes ABA the largest banking trade association in the country.

America’s Community Bankers

America’s Community Bankers represents the nation’s community banks. ACB members, whose aggregate assets total more than $1 trillion, pursue progressive, entrepreneurial and service-oriented strategies in providing financial services to benefit their customers and communities.

Consumer Bankers Association

The Consumer Bankers Association is the recognized voice on retail banking issues in the nation’s capital. Member institutions are the leaders in consumer financial services, including auto finance, home equity lending, card products, education loans, small business services, community development, investments, deposits and delivery. CBA was founded in 1919 and provides leadership, education, research and federal representation on retail banking issues such as privacy, fair lending, and consumer protection legislation/regulation. CBA members include most of the nation’s largest bank holding companies as well as regional and super community banks that collectively hold two-thirds of the industry’s total assets.

Financial Services Roundtable

The mission of The Financial Services Roundtable is to unify the leadership of large integrated financial services companies in pursuit of three primary objectives: to be the premier forum in which leaders of the United States financial services industry determine and influence the most critical public policy issues that shape a vibrant, competitive marketplace and a growing national economy; to promote the interests of member companies in federal legislative, regulatory, and judicial forums; and to effectively communicate the benefits of competitive and integrated financial services to the American public.

Independent Community Bankers of America

The Independent Community Bankers of America is the nation’s leading voice for community banks and the only national trade association dedicated exclusively to protecting the interests of the community banking industry. We aggregate the power of our members to provide a voice for community banking interests in Washington, resources to enhance community bank education and marketability, and profitability options to help community banks compete in an ever-changing marketplace. ICBA has nearly 5,000 members with 17,000 locations nationwide. Our members hold more than $526 billion in insured deposits, $643 billion in assets and more than $405 billion in loans to consumers, small businesses and farms.

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.

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