Safeguarding Federal Reserve Check Services: A Call to Community Banks
- ICBA urges community banks to advocate preserving Federal Reserve check-processing services
- Potential Fed cutbacks could disrupt smaller banks’ operations, payments workflows, and customer experience
- Community banks should strengthen fraud defenses using federal tools, ICBA resources, and solution providers
The Independent Community Bankers of America is calling on community banks to speak up as the Federal Reserve weighs the future of its check collection and processing services. At stake is whether Reserve Banks will continue to provide critical functions that many smaller institutions rely on as their primary—or even sole—check-processing option.
On December 4, the Federal Reserve issued a request for information on whether to maintain or change the Reserve Banks’ check services, which include multiple daily deposit deadlines, return processing, and discrepancy resolution, all offered to banks for a fee. For community banks that lack alternative providers, any move to scale back or discontinue these services could have significant operational and customer-service implications.
To ensure community bank voices are heard, ICBA is directing bankers to its Be Heard grassroots action center, which offers a step-by-step guide for submitting comment letters that highlight the importance of Federal Reserve check services. Comments are due by March 9, creating a short window for banks to outline how changes could impact their payments operations and local communities.
Opposing Views
The debate has already drawn dissent within the Federal Reserve itself. Fed Vice Chair for Supervision Michelle Bowman has publicly stated that she could not support the request for information, arguing that it appears biased toward discontinuing the Reserve Banks’ check services.
This policy discussion comes amid a sharp rise in check fraud, making the stability of check-processing infrastructure even more vital. ICBA is simultaneously urging community banks to bolster their fraud defenses by using tools such as the Treasury Department’s Treasury Check Verification System, Nacha’s ACH Contact Registry, and ICBA’s own marketing and educational resources on check and online fraud. Banks are also encouraged to tap into the ICBA Community’s Fraud subgroup—now more than 1,200 members strong—and the ICBA Solutions Directory to identify payments, compliance, and security providers focused on community bank needs.
In the coming weeks, community banks have a significant opportunity to safeguard key Federal Reserve check services while concurrently enhancing their approach to fraud prevention. We encourage all financial institutions -- both large and small -- to take the time to provide their feedback to the FED regarding this crucial topic.
