The Fed Says Just Four Check Sites Will Handle Paper by 2011

After years of steadily reducing the number of offices processing checks, the Federal Reserve Banks announced on Tuesday they plan to have just four regional centers providing paper check processing services by March 2011. Since the Fed system began restructuring its check-processing operations in 2003, it has already cut the number of offices providing full paper check processing and settlement services from 45 to 22. The increasing popularity of such payment methods as debit cards and check conversion through the automated clearing house had chopped total check volume from an estimated 50 billion in 1995 to 37 billion in 2003, the last year for which the Fed has numbers. According to the latest announcement, the Fed will begin in the first quarter of next year converting most of the remaining check-processing facilities to image exchange, with only the offices in Atlanta, Cleveland, Dallas, and Philadelphia offering full-scale services, including handling paper checks as well as image exchange. Over the next three years, the other 18 offices will be confined to either transmitting images to paying banks and printing image-replacement documents (IRDs), or to printing IRDs only. IRDs are the printouts of check images that, under the Check Clearing Act for the 21st Century (Check 21), must be accepted by paying banks for settlement. Three facilities that had been slated to be shut down?Helena, Mont.; Kansas City; and San Francisco?will be retained as IRD-printing sites. Of the 18 sites handling image-exchange items only, five will be forwarding images as well as printing IRDs. These are Chicago, Denver, Los Angeles, Minneapolis, and Seattle. The other 13 offices will only print IRDs. Under the Fed's plan, the paper volume these sites once handled will be funneled to one of the four full-service offices. “These changes will facilitate ongoing efficiency improvements for the Reserve Banks' check-processing operations in line with the continuing shift in consumer and business preferences for electronic payments,” said Gary Stern, president of the Federal Reserve Bank of Minneapolis and chairman of the Reserve Banks' financial-services policy committee, in the statement released Tuesday. “In addition, these changes support our long-term business strategy to use the authority provided by Check 21 to collect more checks electronically, reducing the reliance on the physical transportation of checks.” The Fed indicated this latest announcement would likely be followed by more outlining further reductions in paper-check operations. “Further Reserve Bank restructuring efforts will be necessary as check volumes continue to decline and as more depository institutions begin to collect checks electronically,” the Fed said in the statement. The actions announced Tuesday will cut the Fed's check-processing staff by 1,740, though the Fed said some reduction will happen through attrition, while some positions may be reassigned.