The US House of Representatives has passed legislation that lets banks exchange electronic images of cheques for clearing and settlement purposes.
The bill, known as the Check 21 Act, is designed to boost the efficiency of cheque clearing by permitting the optional truncation or removal of the original paper cheque from the settlement process.
Passed with an overwhelming majority, the original bill had drawn opposition from consumer groups who feared that electronic cheque processing might weaken consumer rights and be subject to more errors. Lawmakers added a provision clarifying that electronic cheques retain consumer safeguards.
The passing of the bill was welcomed by community banking association ICBA, which believes that expanded use of electronic cheque processing will place community banks on a level playing field, as they will no longer be disadvantaged by their location.
Rusty Cloutier, ICBA chairman and the president of MidSouth National Bank, Lafayette, says: "This is particularly crucial as paper cheque volumes continue to decline and the Federal Reserve, the collective largest processor of community bank cheques, downsizes its cheque processing operations."
Cheque imaging is increasingly taking hold in community banks. The 2002 ICBA and InFinet Resources Community Bank Technology survey indicates that community banks' use of internal cheque imaging technology outpaces that of larger banks by a margin of two to one, with 47% of the respondents currently using the technology and another 41% planning to evaluate the technology within the next 12-18 months.