Bank Float May Sink

The traditional consumer “float” — the time between writing a check and when it actually clears the bank — will be shrinking if Congress approves legislation introduced Thursday that would permit banks to exchange checks by electronic image.

The banking industry says the bill will benefit consumers by speeding up check clearing and making the electronic images — front and back — quickly available to customers. Most banks currently physically move the paper checks through intermediaries before actually drawing on the funds, a process that can take several days or longer.

With most online accounts, digital images of a customer’s checks are available for 60-90 days at no charge, but consumers without Web accounts must wait a month or longer to see when their checks cleared. To get an actual copy of the cancelled check, all customers must go to the bank holding the check.

Sponsored by Rep. Melissa Hart (R.-Pa.), the bill would make the digital image as legal as the actual check.

Consumer benefits aside, the banking industry could save up to $2 billion a year with electronic imaging and save hundreds of customer service hours if consumers can retrieve their own checks.

With the support of bank trade associations, the Federal Reserve and lawmakers from both sides of the aisle, the bill — the Check Clearing for the 21st Century Act is expected to easily pass both the House and Senate and could become law by the end of the year.

“The current system uses the equivalent of the pony express, when technology allows for a quick and secure electronic system. This legislation will bring the check payment system into the 21st Century,” said Rep. Michael Oxley (R.-Ohio), chairman of the House Financial Services Committee.