[Federal Register Volume 70, Number 199 (Monday, October 17, 2005)]
[Notices]
[Pages 60339-60341]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-20663]



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FEDERAL RESERVE SYSTEM


Agency Information Collection Activities: Announcement of Board 
Approval Under Delegated Authority and Submission to OMB

SUMMARY:

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 CFR 1320.16 (OMB 
Regulations on Controlling Paperwork Burdens on the Public). Board-
approved collections of information are incorporated into the official 
OMB inventory of currently approved collections of information. Copies 
of the OMB 83-Is and supporting statements and approved collection of 
information instrument(s) are placed into OMB's public docket files. 
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--Michelle Long--Division of Research and Statistics, Board of 
Governors of the Federal Reserve System, Washington, DC 20551 (202-452-
3829); OMB Desk Officer--Mark Menchik--Office of Information and 
Regulatory Affairs, Office of Management and Budget, New Executive 
Office Building, Room 10235, Washington, DC 20503, or e-mail to 
[email protected].
    Final approval under OMB delegated authority to conduct the 
following survey:
    Report title: Check 21 Act Survey.
    Agency form number: FR 3080.
    OMB control number: 7100-0279.
    Effective date: October 31, 2005.
    Frequency: one-time.
    Reporters: Depository institutions.
    Annual reporting hours: 15,000 hours.
    Estimated average hours per response: 10 hours.
    Number of respondents: 1,500.
    General description of report: This information collection is 
voluntary (12 U.S.C. 5015) and may be accorded confidential treatment 
under the Freedom of Information Act (5 U.S.C. 552 (b)(4)).
    Abstract: Section 16 of the Check Clearing for the 21st Century Act 
(Check 21 Act) requires the Federal Reserve to study the implementation 
of the law and its effect on various aspects of check processing, 
including funds availability, and to report the results of the study to 
the Congress by April 28, 2007.\1\ Specifically, the Congress directed 
the Federal Reserve to study and report to them on:
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    \1\ The Check 21 Act also directs the Federal Reserve to include 
in its report to the Congress any recommendations for legislative 
action.
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    (1) The percentage of total checks cleared in which the paper check 
is not returned to the paying bank;
    (2) The extent to which banks make funds available to consumers for 
local and nonlocal checks prior to the expiration of maximum hold 
periods;
    (3) The length of time within which depositary banks learn of the 
nonpayment of local and nonlocal checks;
    (4) The increase or decrease in check-related losses over the study 
period; and
    (5) The appropriateness of the time periods and amount limits 
applicable under sections 603 and 604 of the Expedited Funds 
Availability Act (EFAA), as in effect on the date of enactment of the 
Check 21 Act.
    To fully address the issues raised by the Congress, the Federal 
Reserve proposed to conduct a survey to ensure the accurate 
characterization of the nation's evolving check processing system. The 
survey would gather data from a nationally representative sample of 
depository institutions, including commercial banks, savings 
institutions, and credit unions.
    Further, the availability for withdrawal of funds deposited by 
check is governed by the Federal Reserve's Regulation CC, which 
implements the EFAA. The EFAA and Regulation CC set maximum permissible 
hold periods for checks deposited into transaction accounts at 
depository institutions. The EFAA directs the Federal Reserve to reduce 
the statutory funds availability schedules as the check clearing system 
improves, while also ensuring that the reduced schedules provide 
depositary banks a reasonable opportunity to learn of the nonpayment of 
most checks in each category (such as ``nonlocal'' checks and ``local'' 
checks). The results of the proposed survey would be used to determine 
whether reducing the hold periods in Regulation CC is warranted.
    Current Actions: On May 10, 2005, the Federal Reserve issued for 
public comment a proposal to conduct the Check 21 Act survey (70 FR 
24581). The comment period ended on July 11, 2005. The Federal Reserve 
received seven comment letters from: three trade associations, two 
banks, one corporate credit union, and one credit union.

Summary of Comments

    All commenters agreed that a survey is appropriate to obtain the 
information necessary to address the Check 21 Act requirements. 
Notwithstanding their support of the survey, nearly all asserted that 
the adoption of Check 21 is taking place relatively slowly; thus, it is 
too early to study its benefits to the check collection system. Two 
commenters expressed concern about the amount of detail requested from 
survey respondents. In addition, two commenters stated that the survey, 
in its proposed form, did not adequately serve its stated purpose. One 
commenter expressed concern regarding whether responses to the survey 
would be kept confidential. Two commenters recommended that the Federal 
Reserve provide adequate notice to selected survey participants and 
extend the submission deadline. Commenters also requested an optional 
narrative section to enable respondents to comment on various issues 
and clarification on particular terms in the survey.

Reporting Burden

    All commenters addressed the estimated burden to depository 
institutions for completing the survey and stated that the actual 
burden to depository institutions would be greater than the Federal 
Reserve had estimated because institutions in many cases do not 
currently maintain data in the form and categories contemplated by the 
survey. (For example, some banks' systems do not distinguish between 
original and substitute checks.) Consequently, depository institutions 
may need to make programming changes or gather the data manually, 
either of which would be costly and time consuming. The Federal Reserve 
recognizes that the burden for each survey respondent will vary based 
on an institution's size and recordkeeping practices. Given that the 
survey has been substantially shortened and simplified in response to 
the comments, the Federal Reserve believes that the estimate of an 
average of ten hours per respondent is reasonable, especially given 
that respondents have the option to respond by providing an estimate or 
by indicating ``don't know.''
    As previously noted, many commenters cautioned that it is premature 
to gauge the effects of the Check 21 Act. Based on Reserve Bank 
experiences and anecdotal industry information, it appears that, to 
date, relatively few depository institutions have taken advantage of 
the new check processing methods made possible by the Check 21 Act and 
that check

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collection and return times have not materially improved since the Act 
became effective. Accordingly, and in light of commenters' statements 
that it would be quite burdensome to respond to the survey as initially 
proposed, the survey has been shortened and simplified, where possible:

     Four questions (out of seven) were deleted from the check 
losses section of the survey (Section 2);
     Four questions (out of five) were deleted from the funds 
availability section of the survey (Section 4); and
     Two questions (out of three) were deleted from the 
returned items section of the survey (Section 5).\2\
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    \2\ Section 1 of the survey requests basic information such as 
institution name, address, and phone number. Section 3, which 
contains two questions, requests information regarding the overall 
volume and value of checks that banks handle. These sections remain 
largely unchanged.
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Survey Methodology

    Three commenters raised questions about the survey methodology, 
postulating that the proposed survey would produce unrepresentative 
results because participation is voluntary and depository institutions 
have the option of providing estimates. Two commenters recommended that 
the survey focus on published funds availability policies (i.e., 
instances where depository institutions' published policies provide for 
faster funds availability than is required by Regulation CC), believing 
that such focus would provide the Federal Reserve with enough 
information to determine whether the maximum hold periods in Regulation 
CC should be shortened. Additionally, two commenters encouraged the 
Federal Reserve to augment the survey by using data collected by 
industry organizations and the Federal Reserve Banks.
    The Federal Reserve believes that the survey methodology is sound. 
The survey panel would be a stratified random sample of approximately 
3,000 depository institutions, including commercial banks, savings 
institutions, and credit unions. While an earlier survey on check 
losses conducted by the Federal Reserve in 1996 achieved only a 30 
percent response rate, the response rates for recent voluntary surveys 
of check payments conducted by the Federal Reserve (with outside 
consultants) have been about 50 percent with nearly all the largest 100 
panel members responding. The Federal Reserve believes that 
modifications to the current survey, such as simplifying the survey, 
will improve the response rate and that the survey is likely to achieve 
a higher response rate than the 1996 survey. If the response rate in 
the more recent surveys is achieved, survey items such as the number 
and value of checks deposited at banks and the number and value of 
checks paid by banks can be estimated with a sampling standard error of 
about 1 percent. Sampling standard errors for other items may be higher 
depending on the variability of the item across banks, and the item 
response rate. While published availability schedules may be easier for 
depository institutions to report, actual funds availability practices 
for check deposits to consumer accounts that do not qualify for 
exception holds under Regulation CC will provide better information for 
the Federal Reserve in considering whether to shorten the maximum hold 
periods. Assuming an improved response rate from that of the 1996 
survey, that the item response rates are high, and that the probability 
of responding is uncorrelated with the variables being estimated (e.g. 
fraud experience), the study will provide statistically valid national 
estimates that are not available from existing industry or trade 
sources.

Confidentiality

    One commenter raised a concern over the confidentiality, 
availability, and accessibility of some of the requested information, 
and suggested that lack of assurance of confidentiality would diminish 
the response rate for voluntary compliance. The commenter states that 
much of the information sought in the proposed survey is considered 
proprietary and confidential by respondents, particularly information 
regarding check losses, internal systems tracking mechanisms, and the 
results determined by these mechanisms. While the commenter indicates 
it has protected many of its internal processes by patenting them or 
obtaining trademark protection, the commenter raises concerns whether 
other trade secret and high level security information would be subject 
to protection.
    First, the information collected in the survey will be treated and 
maintained as confidential by the Board's Division of Reserve Bank 
Operations and Payment Systems (RBOPS). RBOPS will not share this 
information, or otherwise make this information available to, any other 
Federal Reserve staff or to any third parties. Second, the information 
that is collected will be aggregated before it is submitted to the 
Congress. No confidential information will be disclosed, and care will 
be taken to ensure that individual respondents are not identified and 
that their identities cannot be deduced from any information that is 
disclosed. Third, the Federal Reserve regards the information requested 
on the form as confidential and generally subject to protection from 
disclosure under exemption 4 of the Freedom of Information Act (FOIA), 
5 U.S.C. 552(b)(4). Exemption 4 exempts from disclosure ``trade secrets 
and commercial or financial information obtained from a person and 
privileged and confidential.'' In the event of a FOIA request for the 
information, the Federal Reserve would claim exemption 4 as a basis for 
withholding and decline to produce it. If, for any reason, the Federal 
Reserve believes that particular information cannot be withheld from 
disclosure under exemption 4, the Federal Reserve will inform the 
respondent of its views and give the respondent an opportunity to 
object and to provide additional information supporting withholding, as 
required under section 261.16 of the Board's ``Rules Regarding the 
Availability of Information,'' 12 CFR 261.16.

Adequate Notice About the Final Survey and Extension of the Submission 
Date

    Two commenters recommended that the Federal Reserve provide notice 
of the survey to selected participants no later than October 1, 2005, 
and that the Federal Reserve extend the submission deadline from May 
2006 to July 2006 to afford sufficient time for depository institutions 
to implement processes and system changes to facilitate the data 
collection. The Federal Reserve is publishing the final survey in 
October and plans to contact survey participants directly in November 
2005. Based upon prior data collections of this size and complexity, 
the Federal Reserve believes that the submission deadline provides 
ample time for depository institutions to respond to the survey. The 
Federal Reserve will use the time between May 2006 and April 2007 to 
tabulate and analyze responses to the survey, to draft the required 
report to the Congress, and to assess whether any legislative 
recommendations are desirable.

Optional Narrative Section and Other Clarifications

    A few commenters suggested that an optional narrative section be 
included in the survey to enable respondents to comment on various 
issues, including funds availability, consumer protection, and specific 
types of check losses, such as those resulting from fraudulent 
cashier's checks and teller's checks. Inclusion of such a narrative 
section would be infeasible given the survey's sample size and scope.

[[Page 60341]]

    Five commenters suggested that certain language be clarified, and 
several of these suggestions have been incorporated into the survey 
document. For example, the survey now more clearly indicates that 
checks converted to ACH transactions should be excluded, clarifies 
which types of losses should be included as check losses, and explains 
the difference between electronic check presentment and paper check 
presentment. Additionally, the survey document more clearly indicates 
that a respondent should check an estimate box if an answer is an 
estimate, or enter ``DK'' (don't know) if the respondent has volume of 
the type being measured, but is unable to report at least an estimate.

    Board of Governors of the Federal Reserve System, October 11, 
2005.
Jennifer J. Johnson,
Secretary of the Board.
[FR Doc. 05-20663 Filed 10-14-05; 8:45 am]
BILLING CODE 6210-01-P