The Federal Reserve should adopt a long-term approach to phasing out its check services by encouraging electronic payment alternatives, and it should discontinue select paper check services that can be eliminated without causing unnecessary pain, the American Bankers Association and Consumer Bankers Association said in a joint letter.
Federal Reserve Banks offer check collection and processing services at a fee to banks and credit unions. In a request for information last year, the Fed noted that paper check use has steadily declined, and it would need to make substantial investments in its infrastructure to continue providing the same level of service. The Fed sought input on potential future changes to the service it provides, including whether it should reduce check services.
In their letter, ABA and CBA said that check volumes have declined steadily for more than two decades while the cost of processing paper checks and the incidence of check fraud have risen sharply. “This trajectory is not sustainable over the long term,” they said.
The groups proposed a two-prong approach: The Fed should adopt a coordinated long‑term initiative to accelerate the adoption of electronic payment alternatives, and it should identify opportunities to reduce costs by discontinuing select paper check services that can be eliminated without undue harm.
“These efforts should be led through a public‑private partnership including, but not limited to, financial institutions, commercial check users, consumer groups, solution providers, check clearing operators, the Federal Reserve and other relevant government agencies,” they said.
