WASHINGTON – Credit unions using the Fed Reserve for check processing and Fedwire funds transfers can expect to pay more for payment services in 2005. The Federal Reserve Board on Oct. 28 approved fee schedules for Federal Reserve Bank payment services for depository institutions. Specifically for checks: * fees for forward-collection check products will increase 7.9%, return-check products 8.1%, and payor bank check products 2.8%, compared with January 2004 fees; For FedACH: * the Reserve Banks will retain FedACH fees at their current levels. For Fedwire funds and national settlement: * the Reserve Banks will increase Fedwire funds per transfer fees by one cent in all volume tiers, effective July 1, 2005; For Fedwire securities: * the Reserve Banks will increase the off-line surcharge from $28 to $33 per transfer and increase the joint custody surcharge from $30 to $35. The Reserve Banks will retain all other fees at their current levels. Overall, the price level for Federal Reserve priced services will increase about 7% in 2005 from 2004. This increase reflects an approximately 8% increase in paper check service fees combined with a 2.6% increase in fees for the Reserve Banks' electronic payment services. The increases are effective Jan. 3, 2005, except those for Fedwire fund transaction fees which become effective July 1, 2005. The Reserve Banks project they'll recover 100.1% of all their priced services costs in 2005 and estimate they'll recover 94.6% of those costs in 2004. The Fed says the trend away from the use of checks and toward electronic payment alternatives, while being consistent with the Fed's position of encouraging the use of more efficient electronic payment alternatives, has adversely affected the banks' ability to fully recover their costs. From 1994 to 2003, for example, the Reserve Banks recovered 97.8% of priced services costs, including operating costs, imputed costs, and targeted return on equity. Total check revenue in 2005 is projected to decline $24.4 million or 3.2%, compared with the 2004 estimate. In 2005, forward-processed check volume is projected to be 10.6 billion, a decline of 15.8% compared with the 2004 estimate. The decline in check volume, says the Fed, is due to the continued decline in the use of paper checks in the U.S., the increasing use of the ACH to collect payments that were previously processed as checks, price increases, and the reduction in the number of Fed check processing sites. In addition, fine-sort check volume is expected to decline 16.7% from the 2004 estimate. -

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