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Check Restructuring Frequently Asked Questions

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Check Restructuring Changes Frequently Asked Questions

Patrick Barron, first vice president of the Federal Reserve Bank of Atlanta and director of the Retail Payments Office, responds to some common inquiries.

Q: What is the Federal Reserve's long-term strategy for staying in the check business?

Barron: Even as consumers and businesses shift their preferences from paper to electronic payment methods, the Fed remains committed to fulfilling our role as a national provider of check services. We are not exiting any market, and we will continue to deliver the same integrity, reliability, and high level of service that our customers have come to expect.

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Q: How will customer service levels be affected by the restructuring?

Barron: We hope there will be very little impact. In cities where check processing is being moved, we are working to maintain deposit times and availability as close to current service levels as possible. Many of the details are still being fine-tuned for the affected markets, but here is what we know for sure at this time:

  • Drop-off points will be established in cities where checks will no longer be processed, and we will arrange transportation for cash letters from the drop-off point to the processing location.
  • The Fed will provide credit for deposits that are delivered to the drop-off point before the published deadline, and we will assume float risk if receipt is delayed at the new processing location.
  • Cash letters will be deposited just as they are today, even though they will be processed in a new location.

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Q: What will change in terms of the Fed's products and services?

Barron: Meeting the needs of our customers is our most important priority. We will continue to review and adjust our product offerings to ensure they address customer needs and the changing financial services marketplace.

Through our Check Modernization initiative, we have made check services available online via FedLine Web and have implemented new check imaging tools and standard platforms for check processing and adjustments. These innovations will help us roll out new products and services more quickly across the country. In fact, you may have seen the recent news that our FedImage Services product is now available nationwide. We encourage our customers to notify their account representative if they have suggestions for new products in this changing environment.

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Q: How will the Reserve Banks keep customers informed?

Barron: Each step of the way, we will be communicating operational details about the restructuring with our customers. We have promised to notify all customers in affected markets at least 120 days before transitioning the processing of cash letters to an alternate processing location so they can complete any necessary preparations. Our staff will be in regular contact with customers on issues such as transportation, deadlines, testing, and accounting changes, and will solicit their feedback. We will also post updates and related information to our Federal Reserve Financial Services website.

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Q: How do these changes prepare the Fed for The Check Clearing for the 21st Century Act (Check 21)?

Barron: I want to emphasize that these changes were not a reaction to Check 21, which was signed into law on October 28, 2003. Instead, the Reserve Banks needed to address clearly documented declines in check volumes industry-wide and other factors that have been challenging our ability to recover direct and imputed costs of providing payment services. Still, we believe that enhancing our efficiency will serve us well as we continue to provide cost-effective electronic check services. We suspect that the changing economics of check processing will affect how the industry responds to Check 21.

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Q: Who can I contact for more information?

Barron: We encourage our customers to contact their Account Executive with any questions they may have as the restructuring process unfolds through the end of this year and next. In addition, for the most up-to-date information, please continue to visit this site.

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Patrick K. Barron is first vice president and chief operating officer for the Federal Reserve Bank of Atlanta, overseeing operating and support functions for financial services activities at all six offices in that district. Mr. Barron also serves as director of the Retail Payments Office, coordinating check and automated clearinghouse products and services throughout the Federal Reserve System. He works closely with the vice chairman of the Board of Governors and key financial industry representatives in the development of strategies to improve the effectiveness of the U.S. retail payments system.