Electronic Transaction Inroads Force Another Fed Check Closure

Facing an unrelenting decline in paper check volume, The Federal Reserve said today it will shutter yet another check-processing operation in late 2006. Check processing will cease at the Federal Reserve Bank of New York's East Rutherford operations center and its check volume will shift to the Federal Reserve Bank of Philadelphia, according to the Fed's announcement. The latest news brings to 23 the number of check-processing facilities the Fed has either closed or earmarked for closing since early 2003. If further closings aren't decided on, the Fed will process checks at 22 facilities by late 2006, down from 45. “The step announced today will help the Federal Reserve Banks reduce our check service operating costs in line with the continuing shift in consumer and business preferences for electronic payments,” Gary Stern, president of the Minneapolis Fed, said in a statement. “We will continue to evaluate our check processing infrastructure annually to ensure that we are well positioned to meet the needs of the nation's payment system.” Because of inroads made by credit and debit cards and by conversions to the automated clearing house, check volume at Fed facilities has been falling for about six years. The Fed expects the number of checks it handles to drop 15% to 11.8 billion in 2005, following a 12% volume decline, to 13.9 billion checks, in 2004 (Digital Transactions News, May 10). Overall, total check volume has sagged from 50 billion 10 years ago to 42 billion in 2001 to 37 billion in 2003. In response, the Fed announced early in 2003 it would shutter 13 check-processing operations around the country. Last August, it said it would close another nine in 2005 and early 2006. The action announced today will cut the Reserve Banks' overall check staff by 80 positions, or 2% of total check employees. The East Rutherford location employs 140 persons, but the Fed expects to add about 60 positions in Philadelphia to cope with the added volume.