Mr. Speaker, today I am reintroducing the Consumer Checking Account Fairness Act. This bill solves a pressing consumer banking problem. Under the Check 21 Act that we passed last year, money will leave consumers' accounts faster, but…
Mr. Speaker, today I am reintroducing the Consumer Checking Account Fairness Act. This bill solves a pressing consumer banking problem. Under the Check 21 Act that we passed last year, money will leave consumers' accounts faster, but become available at the same old pace. Current check hold times, combined with the speeding up of check processing, create real problems for consumers.
The new Check 21 law facilitates the electronic clearing of checks, which means that checks consumers write will clear sooner. However, banks are still allowed to place the same long check holds on consumers' deposits.
For example: Jane Doe gets paid on Friday, deposits her paycheck Friday evening, and writes a check at the grocery store the next day. The check to the grocery store on Saturday clears on Sunday or Monday, but because Jane's bank puts a hold on her deposit, her paycheck funds cannot be used to cover her checks until the next Wednesday--even if the paycheck has in fact already cleared. If Jane's employer uses a non-local bank to issue her paycheck, Jane's bank can make her wait till the next Monday--ten calendar days--before her pay is available to cover the checks she writes.
Even if Jane's paycheck actually clears within a day or two, her bank does not have to lift the hold. Instead, Jane's bank can: bounce her check and charge her a ``non-sufficient funds'', NSF fee of$20 to $35. The grocery store may also charge a returned check fee or clear the check but charge a $20 to $35 ``bounce protection'' fee, and possibly a per day fee as well for each day before deposited funds are available to cover the check. Bounce protection may be a service she has never requested--and it may be invoked by the bank even though Jane had made a deposit to cover the check before writing the check.
This is patently unfair to consumers. Check hold times should be shortened, so consumers can use their deposits to cover the checks they write after making a deposit.
Check 21 only required that the Federal Reserve Board study check hold times, and gave the Federal Reserve Board until March 2007 to finish that study.
The ``Consumer Checking Account Fairness Act'' solves this problem. The bill:
Reduces check hold times by a day for deposits up to $7,500.
Counts Saturday as a business day toward the check hold period if the bank takes money out of consumer accounts on Saturdays.
Requires banks to process credits before debits: i.e. add deposits before deducting checks.
Prevents banks from charging bounced check fees when the deposit to cover the check has actually cleared but the hold period has not yet been completed.
Increases the ``small check'' amount, for which there is faster funds availability, from $100 to $500.
Requires banks that wish to charge for so-called ``bounce protection'' to get the consumer to request this feature before charging fees to the consumer for it.
Clarifies that deposits at proprietary ATMS are cleared as fast as deposits at a teller.
Requires that banks who charge a fee for a ``substitute check'' under Check 21 cannot insist that the consumer get a substitute check in order to have the bank put funds missing due to a processing error back into the consumer's account within ten business days.
The Consumer Checking Account Fairness Act is balanced and sensible. It preserves the ability of banks to prevent fraud. For example, it leaves in place the ability of a bank to impose a longer hold period for special circumstances, such as a new account or a recent history of bounced checks on an account.
Also, the bill does not require banks to issue ``substitute checks'' under the Check 21 law without any fee; instead it simply says that if the bank decides to charge for the substitute check, then the bank cannot insist that the consumer get that document in order to exercise the consumer's right to a ten business day timeframe to get back funds lost due to a check processing problem, such as a check being paid twice.
Banks benefit from faster check-processing facilitated by Check 21. They should also have to give their customers faster credit for deposits.