New check endorsing rules, which could cost local merchants thousands of dollars to observe, will take effect Sept. 1 across the country. Businesses are concerned about meeting the costs and deadline of the change.
Federal regulation "CC" will require customers and merchants endorsing checks to use no more than 1 1/2 inches of the left-hand end on the back of a check. The remaining space will be for banks handling checks.Congress approved the endorsing policy as part of the Expedited Funds Availability Act - designed to speed up the way checks are processed and ensure prompt credit to bank customers' accounts.
But the upcoming Sept. 1 deadline may come too soon for local merchants to modify rubber stamps and computerized cash registers that liberally recorded identification information on the back of customers' checks.
"The costs could be fairly expensive to get our equipment to conform to that small space," said Boyd Ware, manager of Deseret Book's downtown store and president of the Downtown Retail Merchants Association.
Rocky Mountain Bank Note Inc., which prints checks for many of Utah's financial institutions, said it will have to dump about $100,000 of its inventory to comply with the change. It will soon begin printing checks indicating where customer endorsements should be on the back of checks, a spokesman said, and the additional cost of extra printing will be passed on to local financial institutions.
Many of Salt Lake's merchants first heard of the change this week, Ware said, and they foresee problems with the deadline as well as the cost.
Ware said he is considering requesting help from Utah's congressional delegation to delay implementation of the rules.
Meantime, Utah's banking community is launching an information campaign throughout August to alert consumers and businesses of the change and its ramifications.
"Merchants have routinely used the back of checks to record customer information. Unless this information is restricted to the 11/2 inch space, the depositor may sustain a loss of funds represented by the amount of the check," said Lawrence Alder, executive vice president of the Utah Bankers' Association.
The penalty to depositors not complying with the rule will be a delay in having funds credited to their accounts, Alder added.
Alder said he is sympathetic with merchants concerned about complying with the new rules, but he stressed that the change came from Congress not Utah bankers.
The new check endorsing policy and other changes in the Expedited Funds Availability Act were prompted by consumer requests that financial institutions across the country provide faster credit for deposits.
In addition to restricting the endorsement areas, the act spells out when funds deposited in an account can be available for use and rules to speed up collection and return of checks. The law also requires financial institutions to post their policy on crediting deposits.
Alder said complaints arose from Eastern financial institutions that delayed deposit credits to customers for long periods of time. But, he noted, that most Utah banks have long complied with the new regulations of clearing checks and giving credit within three days for local checks, seven days for out of state checks and next day availability for government and cashier's checks.
While the new endorsement rule apparently won't speed up crediting check deposits for Utahns, according to Alder, it will improve processing bad checks which can take up to a month to make their way through the system.
He explained that the new change will do away with the indecipherable hodgepodge of stamps on the back of a check. After Sept. 1 a depositor's bank must also endorse the check in a specified spot so that other banks can immediately identify to which bank the check must return.