Tese, Vincent-Continued Prepared statement-Continued Attachments: Letter from Louis Carter, superintendent of banks of the State of California with attached material regarding State banking legislation on California banks... List of institutions not in compliance with State banking board's regulation on delayed funds availability. THE EXPEDITED FUNDS AVAILABILITY ACT WEDNESDAY, APRIL 4, 1984 HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON FINANCIAL INSTITUTIONS, COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS, Washington, DC. The subcommittee met at 9:30 a.m. in room 2128 of the Rayburn House Office Building, Hon. Fernand J. St Germain (chairman of the subcommittee) presiding. Present: Representatives St Germain, Annunzio, LaFalce, Barnard, Wylie, and McKinney. Chairman ST GERMAIN. The subcommittee will come to order. Should customers of depository institutions have access to their funds as fast as modern technology will allow or should financial institutions continue to move and credit checks at a pace more in keeping with the days of the pony express? That is the question before this subcommittee. It is a question that has been posed time after time in letters and telephone calls to the committee. For the elderly, the working people, and small businesses-that do not have great surpluses in their accounts-the delays-the extended period of float-are of more than passing interest. It can be a crushing and costly matter for a person denied access to his payroll check or for a small businessman trying to pay his accounts while the local bank holds his deposits. In fact, I may be libeling the old pony express by suggesting it moved as slowly as some banks today. Just a few weeks ago, I received a handwritten letter from a gentleman in Nevada who told me it had taken from November 8, 1983, until December 7, 1983, to transfer $3,000 from an account in New York to a bank in Nevada. And to top off the transaction, his local bank imposed an $8 fee for this fine service. Admittedly, it is some miles between New York and Nevadaparticularly if the check was moved by bicycle courier-but let's take the case of a 45-mile trip between Lake Jackson, TX, and Houston, TX. In this instance, a woman in Lake Jackson sends us copies of the bank's collection sheet and tells us that it took from February 7 to February 29 for a $10,075 check to be transferred from her brother-in-law's account in Houston to her account in Lake Jackson. Even if the bank were moving the checks by foot, it would be hard to justify 22 days to cover 45 miles. And the father of a military serviceman in North Carolina writes to tell us. (1) 2 I received a Federal money order from my son who is in the military, and my bank would not cash that money order unless they froze the amount of the money order in my checking account for 10 working days. And perhaps, under current banking practices, he should feel lucky. The speaker of the California Assembly, Willie Brown, informs us of a case of a small businessman who was denied access to the funds from a $5,000 American Express money order for 5 weeks after he deposited it. The examples go on and on. They're outrageous. Clearly, customers are being denied, in many cases, their rightful interest on deposits, while the banks profit on the extended float. In some cases, customers are socked with high charges on checks that bounce when the crediting of the deposit is delayed. Even the proceeds of Government checks-social security checks includedhave been denied immediate posting. An absurdity. Some of us on the committee have tried time and again to encourage the Federal regulators to step in and come up with regulations that would bring a more rational approach to the crediting of deposits. Finally, 2 weeks ago the regulators came up with a voluntary program urging improvement. This is bureaucratic pabulum and doesn't change anything. I have introduced H.R. 5301 which would prescribe a maximum number of days that different classes of deposits could be held by any depository institution. The bill instructs the Federal Reserve to immediately develop a program that will shorten these maximums-to, in effect, provide almost immediate access to funds. The technology is there. It's time it was used in the interests of the customers. Other members of the committee have also introduced legislation in the same area. Congressman Barney Frank and Tom Carper both have excellent approaches to the program and they will be testifying on these this morning. I also want to note that two States, New York and California, have taken the lead in developing programs in their jurisdictions. I commend them. Out of all this, I am convinced that we can develop a workable approach that will give customers access to their own funds and at the same time protect the soundness of individual institutions. Those of us in the legal profession are familiar with the phrase: "Justice delayed is justice denied." It's about time we stopped delaying justice to depositors of checks and denying them interest on their own hard-earned dollars. [The hearing witness list, the text of H.R. 5301, and a section-bysection analysis of the act follow:] To limit the number of days a depository institution may restrict the availability of funds which are deposited by check. IN THE HOUSE OF REPRESENTATIVES Mr. ST GERMAIN introduced the following bill; which was referred to the A BILL To limit the number of days a depository institution may restrict the availability of funds which are deposited by check. 1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 3 4 SHORT TITLE SECTION 1. This Act may be cited as the "Expedited 5 Funds Availability Act". FINDINGS AND PURPOSE SEC. 2. (a) The Congress hereby finds that— (1) the writing and depositing of checks is an im 6 7 8 9 10 can economy; portant element in the efficient operation of the Ameri |