Financial Consumer Agency of Canada

Financial Consumer Agency of Canada

September 06, 2007 11:30 ET

FCAC: New Public Commitment by Banks Shortens Cheque Holding Times

OTTAWA, ONTARIO--(Marketwire - Sept. 6, 2007) - The Financial Consumer Agency of Canada (FCAC) is informing consumers about a new public commitment by banks in Canada that reduces the maximum time the institutions can hold funds from a cheque.

The new commitment, which came into effect in April 2007, shortens the maximum cheque hold period from 10 to 7 business days. Banks have also agreed to further reduce this hold period to four days, once electronic cheque imaging is fully integrated into the cheque clearing process.

FCAC will monitor banks' compliance with the new public commitment, which applies to cheques deposited by individual consumers, as well as by small- and medium-sized businesses. It covers only Canadian cheques in Canadian dollars, drawn on a bank branch located in Canada.

Currently, cheque clearing involves physically transporting a deposited cheque, sometimes through several cheque processing centres. Hold periods may be applied to funds deposited by cheques to protect banks and their depositors. By applying a hold period, a bank can ensure that there are sufficient funds available to cover the cheque until it clears and settles.

The Canadian Payments Association (CPA) operates clearing and settlement systems in Canada. CPA is currently developing a new system, the Truncation and Electronic Cheque Presentment (TECP), which will move the cheque clearing process beyond the current paper-based system. Under the TECP, a digital image will be taken of a deposited cheque, allowing it to be processed electronically and more quickly. Once the new technology is fully established, banks will be able to reduce hold periods from seven to four business days. For more information on TECP, visit CPA's Web site at www.cdnpay.ca.

"Banks must disclose their cheque hold policies in writing when an account is opened," said FCAC Acting Commissioner Jim Callon. "Consumers should remember that they have options for avoiding or minimizing the impact of holds on funds. For example, they can ask their branch manager whether the hold can be reduced. Also, consumers should consider direct deposit for pay cheques, government cheques and other regular payments they receive."

For information on other public commitments and codes of conduct, consumers can contact FCAC toll-free at 1-866-461-3222. They can also visit the FCAC's Web site at www.fcac.gc.ca, or the Canadian Bankers Association's Web site at www.cba.ca.

FCAC ensures compliance with the consumer protection laws and monitors codes of conduct and public commitments that apply to banks and federally incorporated trust, loan and insurance companies. FCAC also provides consumers with accurate, objective information about financial products and services, and informs Canadians of their rights and responsibilities when dealing with federally regulated financial institutions.

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