The Federal Reserve’s paper check processing consolidation necessitates review of Funds Availability Policies

In response to the declining popularity of paper checks, the Federal Reserve Banks have been restructuring and consolidating their paper processing operations. Since all paper processing will now be centralized in one physical location as of 2/26/10, there will no longer be a distinction between what banks and credit unions have historically designated as “local” and “non-local” checks.

What does this mean to your institution’s Funds Availability Policy?

• Effective 2/27/10, deposit institutions may no longer have distinct Funds Availability Policies for “local” and “non-local” checks.
• As the Federal Reserve will be considering all checks to be “local,” the longest standard delay in funds availability that banks may use is two days, as is currently allowed for local checks.
• A funds availability delay policy of up to five days for “non-local” checks will no longer apply.
• Institutions that currently have a Funds Availability Delay of two days or less may choose to revisit their policy, but need not take action at this time.

Customer communication is necessary.

Institutions whose Funds Availability Policies are affected by this change will be responsible for communicating the revised policy to customers via

• updated in-branch signage as of 2/26/10, and
• a change notice to affected customers by 3/28/10.

The good news is that this change in policy will be welcomed by most consumers, as in most cases their checks will clear more expeditiously.

For more information about the Federal Reserve Banks’ restructuring and how it may affect your institution, please visit:

http://www.frbservices.org/communications/check_restructuring.html

To ensure that your Funds Availability Policy signage is compliant with these recent developments, contact BrandPartners today!