The House : Deposited Checks

A substitute version of legislation addressing the practice of banks, thrifts and credit unions putting long holds on deposited checks was rejected by the House by a vote of 80 for and 211 against.

Backed by the banking lobby, the substitute sought to remove much of the clout from a pending bill (HR 2443), which later was passed and sent to the Senate by an overwhelming margin.

Scores of members who voted for the substitute, to gut the bill, then worked the other side of the political street and voted for the bill on final passage. The final vote was 282-11.

In part, the substitute eliminated statutory limits on how long institutions may hold checks and asked the Federal Reserve Board to propose regulations for dealing with the problem of excessive holds.

Consumer lobbyists said the statutory limits are needed because depository institutions reap unjustified “float” revenue by routinely holding checks drawn on local banks for a week or longer and out-of-town checks for as long as three weeks.

Members said during debate that fewer than 1% of deposited checks eventually bounce.

As sent to the Senate, the bill phases in over three years its limits on how long checks can be held. For the typical depositor, local checks would have to be made payable within two or three days and non-local checks within seven days.

Beginning in the fourth year, local checks would become payable within one business day and all other checks within four days.

Supporter David Dreier (R-La Verne) said: “For banks, this legislation will require a multibillion-dollar investment in computers, software and electronic clearing equipment, the cost of which will again be passed on to the people we’re trying to protect, the American consumer.”

Opponent Fernand St Germain (D-R.I.) said: “My heart cannot bleed for an industry that makes $290 million a year in check floats by holding onto your money and your money and your money, not to mention the $3.5 billion a year reaped from returned check fees.”

Members voting yes wanted to weaken the bill by removing its limits on check holds and leaving regulation up to the Federal Reserve Board.

How They Voted Yea Nay No vote Rep. Dreier (R) x Rep. Martinez (D) x Rep. Moorhead (R) x Rep. Roybal (D) x Rep. Torres (D) x

Check-Hold Waivers

An amendment to HR 2443 (above) that enables depository institutions to waive the check hold limits on a check-by-check basis if they have “a reasonable belief” that certain conditions are present was adopted by the House on a vote of 156 for and 146 against.

For example, an institution could disregard the limits if it suspected that the author of the check was not solvent, that the check was forged or that the depositor was trying to kite the check.

Sponsor Norman Shumway (R-Stockton) said: “Without this kind of amendment, we’re going to be looking at banks suffering increased losses . . . that will be passed on to consumers. We are going to give banks another reason, or excuse, to pass on more service fees.”

Opponent Doug Barnard Jr. (D-Ga.) said the “reasonable belief” test is “so broad . . . a bank can hide behind its provisions.” He said the better protection for banks is to refuse to accept a suspect check.

Members voting yes favored the amendment.

How They Voted Yea Nay No vote Rep. Dreier (R) x Rep. Martinez (D) x Rep. Moorhead (R) x Rep. Roybal (D) x Rep. Torres (D) x