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Every year, approximately 50 billion checks are written, and each night millions of checks are processed and transported for presentment to paying banks across the country. Financial institutions expend significant economic resources in collecting and returning these checks.
On Dec. 17, 2001, Federal Reserve Chairman Alan Greenspan forwarded a legislative proposal to senator Paul S. Sarbanes, the chairman of the Committee on Banking, Housing and Urban Affairs. The proposed Check Truncation Act is designed to foster innovation and create greater efficiency in the payments system by reducing some of the legal impediments to check truncation that exist under current law.
At this time, the proposed act has not been introduced to Congress. If enacted, the act would enable banks to expand their use of electronic methods in collecting and returning checks, which would reduce the industry's reliance on transportation to move checks across the nation.
For more information on this important draft legislation—including a message from Greenspan and a section-by-section analysis of the proposed law—visit the Federal Reserve's Board of Governor's web site: www.federalreserve.gov/paymentsystems/truncation/default.htm.