Change in check-hold times is on hold
By Laura Bruce • Bankrate.com

After reviewing the effect of Check 21 laws, the Federal Reserve Board says this isn't the time to change check holds. That means money will continue to come out of your account a lot faster than it goes in.

Electronic transfers, image exchange and debit cards can remove funds from your checking account anywhere from immediately to within a day or two. But when it comes to depositing checks, funds can take from one day to 11 business days -- even longer in some unusual cases -- to be available to you.

Mindful of this mismatch, Congress ordered the Fed to review the situation after the Check 21 law took effect.

The review is in, and the Fed says that while electronic payments and the use of check images are surging, there hasn't been enough change to warrant shortening check-hold times. The Fed says that "unpaid checks, whether classified as local or nonlocal checks, are not returned to depositary banks soon enough to meet the long-standing congressional benchmark for reducing associated maximum permissible hold periods." That benchmark is two-thirds of the checks in a given category.

Rep. Carolyn Maloney, who sponsored legislation aimed at reducing check-hold times, says she's disappointed at the Fed's decision.

The New York Democat says, "in a Catch-22 for consumers, the Fed says it won't take action to shorten deposit hold times until a super-majority of its member banks do so first." She adds, "we have the technology to reduce hold times and help consumers better manage their finances. I urge the Fed to lead our nation's banks on this issue, not just follow them."

To be fair, most consumers have access to deposited checks faster than required under the law. The Fed study indicates that banks provide speedier access than required on 90 percent of all consumer deposits of local and nonlocal checks.

"That's something we were worried they would say," says Gail Hillebrand, senior attorney at Consumers Union. "They took an overall (attitude) that most checks clear sooner, 90 percent they say, and therefore the implication is that it's not a problem. But if 90 percent of consumers never have a check-hold problem and 10 percent have it all the time, that's a big problem for that 10 percent."

Electronic transactions are faster
Hillebrand points out that the study only looked at checks and not Automated Clearing House (ACH) transactions. "From the customer's point of view, they've written a check, but legally it's no longer a check (once it's converted) and the money is leaving their account faster because it's processed as an ACH transaction."