WRITTEN STATEMENT OF THE
CREDIT UNION NATIONAL ASSOCIATION (CUNA)
ON IMPLEMENTATION OF THE CHECK CLEARING FOR THE 21ST CENTURY ACT
TO THE SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND
APRIL 20, 2005
The Credit Union National Association (CUNA) would like to submit this statement regarding issues surrounding the implementation of the Check Clearing for the 21st Century Act (Check 21). By way of background, CUNA is the largest trade association serving credit unions in this country. CUNA represents over 90% of our nation's 9,300 state and federal credit unions. Approximately 86 million consumers are credit union members.
Credit unions are dedicated to providing their members with excellent financial benefits and quality service. This is evidenced by many credit unions' liberal hold policies that were in place before the enactment of Check 21. We understand that checks or share drafts, including non-local items, that are deposited into credit unions are generally available sooner than the Expedited Funds Availability Act (EFAA) requires.
CUNA believes that the benefits of Check 21 should be shared with consumers and supports current statutory consumer protections regarding check collections. In fact, most credit union members realize benefits at the time their deposits are made and not when the credit union receives credit for the deposited funds. This is because credit unions typically pay dividends (interest) to their members when a deposit is made to an interest-bearing account and not at a later date, when they receive credit for the check. This is another example of credit unions placing a priority on members' interest, as Regulation CC, which implements the EFAA, does not require dividends to accrue on funds deposited until the day a financial institution receives credit for the funds.
Check 21 became effective approximately six months ago, on October 28, 2004. It was designed to enhance efficiency in the payments system by facilitating the electronic exchange of checks and allowing financial institutions to handle more checks electronically. Since the implementation of Check 21, there has been little change to the check clearing system, and credit unions, in particular, have rarely seen checks converted to substitute checks. We believe efficiency to the check clearing system will occur, but will do so gradually over the coming years and support the Federal Reserve Board's efforts to expedite the full implementation of Check 21.
Section 16 of Check 21 requires the Federal Reserve Board to study the appropriateness of check hold time periods and amount limits by April 28, 2007. This provides sufficient time for more financial institutions to participate in electronic imaging and for the Federal Reserve to study its impact on consumers on an informed basis. Additionally, the EFAA requires the Federal Reserve Board to monitor check collection times and to reduce hold times to as short a time as possible when check clearing times improve.
CUNA looks forward to working with Congress and the Federal Reserve Board and will welcome the opportunity to provide feedback as needed on credit union check hold policies, check collection times, and the check payment system and its impact on credit union members.