WASHINGTON — America’s Credit Unions is urging the Federal Reserve to clarify how financial institutions can recover the rising costs of providing check services as the central bank evaluates the future of the Federal Reserve Banks’ check-processing system.
In a comment letter responding to the Fed’s request for information on the future of its check services, the trade group said credit unions are already subsidizing paper check payments to a significant degree compared with electronic payment alternatives.
The organization said the high cost is driven in part by the manual review and intervention required to prevent fraud associated with paper checks.
“Credit unions are already subsidizing paper check payments to an extreme extent,” the group wrote, noting that declining check volumes are driving up the per-item cost of processing checks. ACU Fed Letter
America’s Credit Unions said that if Federal Reserve check service costs increase or if institutions are forced to turn to private-sector alternatives, regulators should make clear that financial institutions can recover those costs through check-related fees.
Such clarification may require coordination with the Consumer Financial Protection Bureau, the organization said, noting the CFPB has previously attempted to classify some fees as impermissible “junk fees.” The trade group warned that if credit unions cannot recover the growing costs of check handling, the only way to preserve access to checks for members who still rely on them may be to charge higher processing fees.
The letter recommends the Federal Reserve and the CFPB consider adopting a regulatory “safe harbor” allowing financial institutions to charge fees designed specifically to cover the cost of providing check services in an environment where check usage is declining and per-item costs are rising. ACU Fed Letter
America’s Credit Unions said such a policy would help ensure members who continue to depend on paper checks can maintain access to the payment method while allowing credit unions to manage the growing costs of supporting it.
The letter was signed by Andrew Morris, director of innovation and technology at America’s Credit Unions.
