Published: September 2014

Ban remotely created checks and check hold times for prepaid cards

In light of the once-in-a-decade review of all insured-banking related regulations, (the 1996 Economic Growth and Regulatory Paperwork Reduction Act), consumer advocates submitted a letter to the Federal Reserve Board asking the Board to closely monitor the payment processing procedures and compliance safeguards currently in place. Advocates also reminded regulators that consumer protection should be their first priority during the review, citing banking regulations that did not protect consumers as the main cause of the global economic crisis of 2008.

In response for a call by the Federal Reserve Board for comments to identify outdated, unnecessary or unduly burdensome regulations (the Economic Growth and Regulatory Paperwork Reduction Act of 1996), consumer groups said that regulations should not be reviewed for potential burden on financial institutions without also reviewing them for updates and additions needed to strengthen consumer protection. The groups cited banking regulations that did not protect consumers as the main cause of the global economic crisis of 2008. In particular, the groups suggested that banking Regulation CC (Availability of Funds and Collection of Checks) needs to be updated to ban remotely created checks and remotely created payment orders for consumer transactions and to clarify the deposit hold times for check deposits to prepaid cards and by way of remote deposit capture.

While the financial industry argues that the regulatory burden has only grown heavier under the Dodd-Frank Wall Street Reform law, consumer groups fear regulators will loosen the statute. Marcus Stanley, policy director for the group Americans for Financial Reform, said Dodd-Frank rules should be off-limits in the review.  Many of the statute's rules remain incomplete or have not been in place long enough to assess their success, he argued. It would be “crazy just to turn around and re-litigate them."

 

 

Lead Organization

National Consumer Law Center (NCLC)

Other Organizations

National Consumer Law Center, on behalf of its low income clients | Center for Responsible Lending | Consumer Action | Consumer Federation of America | Consumers Union | National Association of Consumer Advocates | National Consumers League | U.S. PIRG

More Information

For more information, please read the coalition's letter to the Federal Reserve Board here.

Download PDF

No Download Available