Check This Out

[R.A. Hettinga]

<http://www.nytimes.com/2004/10/31/opinion/01mon2.html?th=&pagewanted=print&position=>

The New York Times

October 31, 2004
EDITORIAL

Check This Out
Never content to pass savings along to customers, banks - with a little
help from their friends in Congress - are again poised to turn a basic
service into a profit center.

 Last week, federal law began allowing banks greater latitude to process
checks electronically, reducing to minutes or hours the time it takes for
the money to be deducted from a check writer's account. But there is no
change in the length of time that banks can hold deposited checks before
making the funds available - up to two days for local checks, five days for
nonlocal checks and 11 days for checks over $5,000. So in addition to
saving an estimated $2 billion a year in paper processing costs, the banks
will make loads of money on the float.

And not just from that. By processing checks faster while placing holds on
deposits, banks are increasing the chances of bouncing a check. As banks
start using the new procedures, unsuspecting consumers will bounce an
estimated seven million more checks a month and pay an additional $170
million in monthly bounced-check fees. Worse yet, to promptly correct
problems that may arise from electronic processing, such as double payment
of a single check or payment in the wrong amount, the new rules require a
customer to present a copy of the check's electronic image, known as a
"substitute check." There's nothing to prevent a bank from charging a fee
for providing the copy.

Groups like Consumers Union and the Consumer Federation of America have
come out strongly against the law's lack of customer protection. The banks
should listen. At the least, banks that use the new electronic procedures
should adopt a no-hold policy for deposits by customers with problem-free
accounts. If the banks do not change their policies, the Federal Reserve
should force them to by changing the rules on fund availability. We would
also like to see a major bank step up and pledge to re-credit accounts
within 10 days of a customer's reporting an error, without the need for a
substitute check. That would, in effect, extend the same protection to
electronically processed checks that debit cards enjoy, as well as set a
standard of customer service for other banks to match.

 Banks do not have to gouge their customers just because the law permits it.

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R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'