The Financial Consumer Agency of Canada (FCAC) has issued a reminder to consumers about a new public commitment by banks in Canada that reduces the maximum time the institutions can hold funds from a cheque.

The new commitment, which came into effect in April 2007, shortens the maximum cheque hold period from 10 to seven business days. FCAC says banks have also agreed to further reduce this hold period to four days, once electronic cheque imaging is fully integrated into the cheque clearing process.

FCAC says it will monitor banks’ compliance with the new public commitment, which applies to cheques deposited by individual consumers, as well as by small- and medium-sized businesses. It covers only Canadian cheques in Canadian dollars, drawn on a bank branch located in Canada.

The Canadian Payments Association (CPA) operates clearing and settlement systems in Canada. CPA is currently developing a new system, the Truncation and Electronic Cheque Presentment (TECP), which will move the cheque clearing process beyond the current paper-based system. Under the TECP, a digital image will be taken of a deposited cheque, allowing it to be processed electronically and more quickly. Once the new technology is fully established, banks will be able to reduce hold periods from seven to four business days, says FCAC.