Panel Votes to Force Banks to Clear Checks in One Day

The House Banking Committee, responding to a flood of consumer complaints, Thursday approved a bill to force banks to clear most local checks in one day and out-of-town checks in four days.

The measure, approved on a voice vote, now goes to the full House, where passage is expected.

Committee Chairman Fernand J. St Germain (D-R.I.) called the problem of check holds “an issue of simple justice--giving consumers timely access to their deposited funds.”

“Never has an issue generated more consumer mail in this committee than check holds,” he said.

Could Get Extra Day

The bill, a compromise worked out among committee members, would require that most checks from the same check-processing regions be held for only one day. The Federal Reserve Board would, in extraordinary circumstances, be allowed to grant banks an additional day on a case-by-case basis.

All other checks would have to be cleared within a maximum of four days. An additional day would be allowed in Hawaii for checks that come from outside that state.

Funds from government checks would be available the day after they are deposited.

The problem of check holds has bothered bank customers for years, committee members said. In some cases, deposited checks have been held for weeks, with the customer unable to use the money.

Problems Remain

As a result of the complaints, both the House and Senate appear ready this year to require shorter time periods for check clearing. However, a few potential problems remain before the bill can become law.

The Senate has approved a more limited version of the check hold bill, requiring that checks be cleared within six business days.

Also, the Senate’s check hold language is included in a comprehensive banking overhaul measure that contains some other sensitive matters that could run into opposition in the House.