[Federal Register Volume 61, Number 52 (Friday, March 15, 1996)]
[Notices]
[Pages 10765-10766]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6188]



-----------------------------------------------------------------------


FEDERAL RESERVE SYSTEM

Agency Information Collection Activities: Submission to OMB Under 
Delegated Authority

Background

    Notice is hereby given of the final approval of a proposed 
information collection by the Board of Governors of the Federal Reserve 
System (Board) under OMB delegated authority, as per 5 C.F.R. 1320.16 
(OMB Regulations on Controlling Paperwork Burdens on the Public). The 
Federal Reserve may not conduct or sponsor, and the respondent is not 
required to respond to, an information collection that has been 
extended, revised, or implemented on or after October 1, 1995, unless 
it displays a currently valid OMB control number.

FOR FURTHER INFORMATION CONTACT:

Federal Reserve Board Clearance Officer--Mary M. McLaughlin--Division 
of Research and Statistics, Board of Governors of the Federal Reserve 
System, Washington, DC 20551 (202-452-3829)
OMB Desk Officer--Milo Sunderhauf--Office of Information and Regulatory 
Affairs, Office of Management and Budget, New Executive Office 
Building, Room 3208, Washington, DC 20503 (202-395-7340)

    I. Final approval under OMB delegated authority of the 
implementation of the following report:
    Report title: Federal Reserve Check Fraud Survey.
    Agency form number: FR 3080.
    OMB Control number: 7100-0279.
    Frequency: One-time.
    Reporters: Commercial banks, savings associations, and credit 
unions.
    Annual reporting hours: 14,976.
    Estimated average hours per response: 9.
    Number of respondents: 1,664.
    Small businesses are not affected.
    General description of report: This information collection is 
voluntary [Publ. L. 103-325, Title III, section 333] and is 
confidential [5 U.S.C. section 552(b)(4)].
    Abstract: The Board has approved conducting a one-time, voluntary 
check-fraud survey in March 1996. The responses to the survey will be 
used by the Board in fulfilling the Congressional mandate to determine 
whether there is a pattern of significant increases in losses related 
to check fraud at depository institutions attributable to the 
provisions of the Expedited Funds Availability Act (EFAA); to consider 
whether an extension by one day of the period between the deposit of a 
local check and the availability of funds for withdrawal would be 
effective in reducing the volume of losses related to check fraud; and 
to make recommendations for legislative actions.

II. Justification

    The 1994 Community Development Banking Act states that the Board 
shall ``conduct a study on the advisability of extending the 1-
business-day period specified in section 603(b)(1) of the Expedited 
Funds Availability Act (EFAA), regarding availability of funds 
deposited by local checks, to 2 business days.'' The report is to be 
submitted to the Congress by September 23, 1996. The Congress further 
directed the Board to:
     Consider whether there is a pattern of significant 
increases in losses related to check fraud at depository institutions 
attributable to the provisions of the EFAA;
     Consider whether an extension by one day of the period 
between the deposit of a local check and the availability of funds for 
withdrawal would be effective in reducing the volume of losses related 
to check fraud; and
     Make recommendations for legislative action.
    On December 20, 1995, the Board requested public comment on a 
proposed check-fraud survey. The survey is intended to obtain data on 
the number of cases of check fraud and the amount of losses incurred by 
depository institutions attributed to check fraud.

III. Analysis of Comments

    The Board received 45 comment letters on the proposed survey. The 
following table identifies the number of commenters by type of 
organization:


Commercial Banking Organizations \1\............................      28
Credit Unions...................................................       8

[[Page 10766]]
                                                                        
Savings Banks...................................................       2
Federal Reserve Banks...........................................       2
Clearing Houses.................................................       1
Trade Associations..............................................       1
Other \2\.......................................................       3
                                                                 -------
    Total Commenters............................................     45 
                                                                        
\1\ Banks, bank holding companies, and operating subsidiaries of banks  
  or bank holding companies.                                            
\2\ Law firms and consumer research groups.                             


    Thirty-three commenters supported the Board's conducting the check-
fraud survey. Seven of those commenters also indicated that the EFAA 
availability schedules should be lengthened. Eight commenters did not 
address whether the Board should conduct the check fraud survey. Five 
of those commenters, however, supported an extension of the EFAA 
schedules, while three commenters indicated that no changes should be 
made to the EFAA. Two commenters questioned the methodology of the 
survey and indicated that they do not support any changes to the EFAA. 
Two commenters stated that the survey should not be conducted because 
they experienced no losses related to check fraud or the EFAA 
schedules.
    Five commenters addressed the issue of the estimated burden to 
depository institutions of completing the survey document. Three 
commenters indicated that the estimated burden was reasonable. Two of 
the commenters, however, stated that the actual burden to DIs would be 
greater than estimated because obtaining the requested information 
would require a manual review of records. The Board recognizes that the 
burden for each survey respondent will vary based on an institution's 
recordkeeping practices and experience with check fraud, but continues 
to believe that its estimate of an average of nine hours per respondent 
is reasonable.
    Two commenters suggested that the survey should be conducted 
prospectively. A prospective approach would allow depository 
institutions to collect actual data in the format the Board requires, 
thus improving the accuracy and the response rate. The Board considered 
this option but rejected it because a prospective survey would 
significantly increase the recordkeeping burden for depository 
institutions and would not likely improve the response rate. In 
addition, because the Board must report to the Congress in September 
1996, there is not sufficient time to permit DIs to make the necessary 
programming changes to their data reporting systems, collect the data, 
and provide it to the Board in time to meet the Congressionally 
mandated schedule.
    Six commenters suggested that additional definitions be added to 
the survey and that certain language be clarified. Several of the 
suggested clarifications and definitions were made to the survey 
document. For example, definitions were added for the number of cases 
of check fraud and the dollar amount of losses. Several commenters also 
asked that the definition of ``organized and professional efforts'' in 
check fraud be clarified. Because of ambiguity of this question and the 
difficulty in determining a clear definition, the question has been 
deleted from the survey.
    Six commenters suggested that additional detail be added to some 
questions or that some categories of checks be expanded. In response to 
these comments, the Board expanded the scope of six questions. 
Questions were expanded to address large-dollar return notifications 
and their effectiveness in preventing losses; to obtain information on 
the number of checks returned from the paying bank; to address DIs' 
interest in modifying Regulation CC for new accounts; and to expand the 
categories of fraudulent checks.
    Two commenters raised questions about the survey methodology. These 
commenters postulated that the survey, as proposed, would produce 
biased results because participation is voluntary; depository 
institutions have the option of providing estimates; and depository 
institutions with less than $1 million in transaction accounts are 
excluded.
    The Board believes that the survey methodology is sound. The survey 
sample is based on a stratified random sample of 5,200 commercial 
banks, savings institutions, and credit unions, drawn to achieve a 95 
percent confidence interval for the results, based on an expected 
overall response rate of 32 percent. A minimum of $1 million in 
transaction accounts was established to reduce the burden on smaller 
institutions. In addition, while the Board would prefer that 
respondents to the survey provide data on actual losses, the Board 
understands that it is unrealistic to expect all institutions to 
collect the required data in the format requested because of the 
differences in how DIs collect data concerning check-fraud losses. 
Therefore, to ensure that a significant number of DIs will be able to 
respond to the survey, the survey allows for estimates. Statistical 
analyses and follow-up with non-respondents will be used to test for 
potential bias in the responses. For example, an institution may not 
respond to the survey because it does not experience check-fraud losses 
or because the data are unavailable in the requested format. Follow-up 
with the non-respondents will provide further information about the 
reasons, and where appropriate, such information will be integrated 
into the analyses.
    One commenter also questioned the content of the questionnaire. The 
commenter indicated that the survey questions appeared to be biased 
``toward obtaining the results that check fraud volume, losses and 
costs (1) are enormous, (2) are due to the check hold law, and (3) can 
be reduced by lengthening the check-hold period.'' The Board believes 
that the questions in the survey will provide the information needed to 
determine the magnitude of check-fraud losses and whether lengthening 
the check hold period would reduce these losses. At this time, the 
Board has no preconceived notions about the outcome of the survey 
results. The costs and benefits of any recommended changes to 
regulations will be carefully reviewed.
    Several commenters addressed issues other than the survey. These 
issues included arguments both for and against extending the EFAA 
availability schedules; discussion of an institution's experiences with 
check fraud; discussion of check-fraud prevention methods other than 
modifying the EFAA; and suggestions on how the Board should evaluate 
the results. The Board will take these additional comments into 
consideration when developing legislative recommendations.
    In addition to the above comments, the Board received seven 
completed draft survey forms, indicating a good interest in the survey.
    The survey questionnaire was distributed following Board approval.

    Board of Governors of the Federal Reserve System, March 11, 
1996.
Jennifer J. Johnson,
Deputy Secretary of the Board.
[FR Doc. 96-6188 Filed 3-14-96; 8:45 am]
BILLING CODE 6210-01-P