House Committee OKs Limits on Check Holds

A bill to limit the number of days that banks can hold deposited checks before making the money available to their customers was approved Wednesday by the House Banking Committee.

The measure now goes to the full House, where passage is expected, perhaps as early as next month.

“We are attempting to change the policies of the banks that play the float game,” Rep. John J. LaFalce (D-N.Y.) said.

The Consumer Federation of America, Congress Watch and Consumers Union issued a joint statement calling the committee action, taken by voice vote, “a major victory for banking consumers.”

Banking industry representatives are opposed to the measure but deny that their opposition is rooted in a desire to maximize interest profits by holding customer funds a few days after the banks themselves get credit for them. Instead, they argue that reasonable check “holds” are necessary to guard against the banks incurring losses if a deposited check is subsequently dishonored--a procedure even proponents of the bill acknowledge takes several days.

The bill requires the Federal Reserve to develop a system within three years under which deposited checks would be available for withdrawal on the next business day when drawn on a bank or other financial institution in the same geographic area.