The Fed Plans for Nine More Check-Office Closings by Early 2006

The Federal Reserve Banks announced today they plan to shutter check-processing operations at nine facilities during 2005 and early 2006. The Fed now plans to consolidate check operations in 23 remaining locations. In a statement, the Fed says the decision “respond[s] to the nation's increasing substitution of electronic payments for paper checks.” The Fed last month said it planned to close operations at additional check-processing sites in response to an accelerating slide in check volume (Digital Transactions News, June 18), and today's announcement sets out details concerning where operations will cease and over what period of time. The Fed's check volume dropped 6% in the first quarter, following a 5% decline in 2003. Of the approximately 42 billion checks written annually, the Fed handles 14 billion, or one-third. By shutting down operations at additional sites and consolidating check volume in remaining locations, the Fed says it hopes to maintain processing efficiencies and manage the ongoing decline in volume without driving up per-item costs. Inroads made by electronic forms of payment, such as debit cards and the automated clearing house, forced the Fed early last year to announce it would close check-processing operations at 13 of 45 offices by the end of 2004. Now the accelerating decline in volume has led the central bank to add nine more sites to the list, cutting the original roster of centers nearly in half. The nine offices where check operations are scheduled to close are: Boston; Columbus, Ohio; Birmingham, Ala.; Nashville, Tenn.; Detroit; Oklahoma City, Okla.; Houston; Portland, Ore.; and Salt Lake City. In each case, operations are moving to other centers in the region. The Houston and Oklahoma City operations, for example, will move to the Fed's Dallas site. The Fed expects to eliminate about 640 positions in the offices where check operations will cease, but also expects to add about 370 jobs in the offices where operations are consolidating, resulting in a net job loss of 270 positions, or 6% of total staff related to check processing. According to numbers released recently by the Fed, the volume of checks it processed dove nearly 6% in the first quarter to 3.64 billion, the second biggest quarterly drop in the past 15 years (Digital Transactions News, June 10). The Fed is now processing the smallest volume of checks recorded since 1989. Meanwhile, debit card transactions secured by signatures and personal identification numbers grew nearly 20% last year, while electronic checks through the ACH ballooned 154%. Also, banks are preparing to participate in new networks that will allow them to convert checks into digital images and swap either the images or subsititute checks for settlement.