to reduce its reliance on physical transportation, the proposed act would also reduce the risk that checks may be lost or delayed in transit. today, bad weather routinely delays check shipments and there have been occasions when checks have been destroyed in plane crashes. the banking industry's extensive reliance on air transportation was underscored in the aftermath of the september 11 tragedy, when air transportation came to a standstill and the flow of checks slowed dramatically. during the week of the attacks, the federal reserve banks'daily check float, which is normally a few hundred million dollars, ballooned to more than $ 47 billion. had the proposed legislation been in effect at that time and had banks been using a robust electronic infrastructure for check collection, banks would have been able to collect many more checks by transmitting electronic check information across the country and presenting substitute checks to paying banks. finally, many banks hope to use the authority provided by this legislation to streamline the processing of checks that they must return unpaid. today, after a bank processes its incoming checks and determines which checks to return, it has to reprocess all of the incoming checks to pull out the less than one percent of checks that are to be returned unpaid. many banks have indicated to us that they would find it more cost effective to use their image systems to generate substitute checks for return rather than to outsort the returned checks from all the checks presented. the act might also better position banks to provide new and improved services to their customers. for example, banks might allow some corporate customers to transmit their deposits electronically. because the act will likely encourage greater investments in image technology, banks might also be able to expand their customers'access to enhanced account information and check images through the internet. in addition, banks might be able to resolve customer inquiries more easily and quickly than today by accessing check images. the act is designed to provide banks with additional flexibility in processing checks by requiring banks to accept substitute checks in place of original checks. the act does not, however, require banks to accept checks in electronic form nor does it require banks to use the new authority granted by the act to create substitute checks. this market - based approach permits each bank to decide whether to make use of this new authority. this decision will be based on the bank's internal business case analysis, which will assess the costs and benefits of using the new authority. we believe the market changes arising from these revisions to check law will result in substantial cost savings. clearly, because substitute checks

that substantially revise the process by which banks return unpaid checks, which has expedited the receipt of those checks by depositary banks and ensured prompt notice of large - dollar returned checks. in addition, the board has adopted rules that enhance the legal abilities of private - sector banks to obtain same - day final settlement for checks presented by a specified time, which has spurred competition in the provision of check clearing services, improved efficiency, and sped the collection of many checks. section 611 ( f ) of the efaa states " the board is authorized to impose on or allocate among depository institutions the risks of loss and liability in connection with any aspect of the payment system, including the receipt, payment, collection, or clearing of checks, and any related function of the payment system with respect to checks. liability under this subsection shall not exceed the amount of the check giving rise to the loss or liability, and, where there is bad faith, other damages, if any, suffered as a proximate consequence of any act or omission giving rise to the loss or liability. " [ 12 u. s. c. § 4010 ( f ) ]