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THE EXPEDITED FUNDS AVAILABILITY ACT

HEARING

BEFORE THE
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
SUPERVISION, REGULATION AND INSURANCE

OF THE

COMMITTEE ON
BANKING, FINANCE AND URBAN AFFAIRS

HOUSE OF REPRESENTATIVES

NINETY-EIGHTH CONGRESS

SECOND SESSION

ON

H.R. 5301
A BILL TO LIMIT THE NUMBER OF DAYS A DEPOSITORY INSTITUTION

MAY RESTRICT THE AVAILABILITY OF FUNDS

WHICH ARE DEPOSITED BY CHECK

APRIL 4, 1984

Serial No. 98-93

Printed for the use of the
Committee on Banking, Finance and Urban Affairs

U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 1984

34-833 O

HOUSE COMMITTEE ON BANKING, FINANCE AND URBAN AFFAIRS

FERNAND J. ST GERMAIN, Rhode Island, Chairman HENRY B. GONZALEZ, Texas

CHALMERS P. WYLIE, Ohio JOSEPH G. MINISH, New Jersey

STEWART B. MCKINNEY, Connecticut FRANK ANNUNZIO, Illinois

GEORGE HANSEN, Idaho PARREN J. MITCHELL, Maryland

JIM LEACH, Iowa WALTER E. FAUNTROY, District of

RON PAUL, Texas Columbia

ED BETHUNE, Arkansas STEPHEN L. NEAL, North Carolina

NORMAN D. SHUMWAY, California JERRY M. PATTERSON, California

STAN PARRIS, Virginia CARROLL HUBBARD, JR., Kentucky

BILL McCOLLUM, Florida JOHN J. LAFALCE, New York

GEORGE C. WORTLEY, New York NORMAN E. D'AMOURS, New Hampshire MARGE ROUKEMA, New Jersey STAN LUNDINE, New York

BILL LOWERY, California MARY ROSE OAKAR, Ohio

DOUG BEREUTER, Nebraska BRUCE F. VENTO, Minnesota

DAVID DREIER, California DOUG BARNARD, JR., Georgia

JOHN HILER, Indiana ROBERT GARCIA, New York

THOMAS J. RIDGE, Pennsylvania
MIKE LOWRY, Washington

STEVE BARTLETT, Texas
CHARLES E. SCHUMER, New York
BARNEY FRANK, Massachusetts
BILL PATMAN, Texas
WILLIAM J. COYNE, Pennsylvania
BUDDY ROEMER, Louisiana
RICHARD H. LEHMAN, California
BRUCE A. MORRISON, Connecticut
JIM COOPER, Tennessee
MARCY KAPTUR, Ohio
BEN ERDREICH, Alabama
SANDER M. LEVIN, Michigan
THOMAS R. CARPER, Delaware
ESTEBAN E. TORRES, California

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS SUPERVISION, REGULATION AND

INSURANCE

FERNAND J. ST GERMAIN, Rhode Island, Chairman FRANK ANNUNZIO, Illinois

CHALMERS P. WYLIE, Ohio
CARROLL HUBBARD, JR., Kentucky

GEORGE HANSEN, Idaho
NORMAN E. D'AMOURS, New Hampshire JIM LEACH, Iowa
DOUG BARNARD, JR., Georgia

ED BETHUNE, Arkansas
JOHN J. LAFALCE, New York

STEWART B. MCKINNEY, Connecticut MARY ROSE OAKAR, Ohio

NORMAN D. SHUMWAY, California BRUCE F. VENTO, Minnesota

BILL McCOLLUM, FLORIDA ROBERT GARCIA, New York

BILL LOWERY, California CHARLES E. SCHUMER, New York

GEORGE C. WORTLEY, New York
BILL PATMAN, Texas

DAVID DREIER, California
STEPHEN L. NEAL, North Carolina
BARNEY FRANK, Massachusetts
RICHARD H. LEHMAN, California
JIM COOPER, Tennessee
BEN ERDREICH, Alabama
THOMAS R. CARPER, Delaware

RICHARD L. Still, Subcommittee Staff Director

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CONTENTS

Page

21

4
3

STATEMENTS

27

153

136

39

Callahan, Hon. Edgar F., prepared statement

166

Carper, Hon. Thomas R. prepared statement....

32

Conover, Hon. C.T.:

Letter to Chairman St Germain dated April 18, 1984, responding to

request to provide information in four areas as follows: () Data on

banks that almost failed because of kiting, (2) results of questionnaire

use in examinations, (3) examples of voluntary compliance, and (4)

rulemaking authority regarding check endorsement standards.

232

Prepared statement

157

Douglas, William E.:

Prepared statement

133

Response to question of Congressman Chalmers P. Wylie regarding cita-

tion from the United States Code on time limitations for presenting

certain claims of the Government.........

141

D'Amato, Senator Alfonse M., prepared statement

44

Gray, Hon. Edwin J., prepared statement on behalf of the Federal Home Loan

Bank Board..

177

Martin, Hon. Preston:

Letter to Chairman St Germain dated April 24, 1984, responding to

questions regarding actions industry groups have taken on delayed

availability and fee income banks receive from returned checks ..... 264

Prepared statement on behalf of the Board of Governors of the Federal

Reserve System ...

190

New York State Banking Department, News release with attached list of

institutions not in compliance with State banking board's regulation on
delayed funds availability, dated April 3, 1984.

411

St Germain, Chairman Fernand J., letters of invitation to the witnesses ....... 389-398

Tese, Vincent:

Letter from the New York State Banking Board dated February 27, 1984,

with attached new general regulation, part 34, regarding withdrawal of

funds

399

Prepared statement

66

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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 leg

islation 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,

SUPERVISION, REGULATION AND INSURANCE,
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.

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