655 15TH ST, NW, SUITE 700 WASHINGTON, DC 20005 TELEPHONE: 202/452-8444 FAX: 202/429-4519

April 30, 1999

Dear Ms. Johnson:

On behalf of the 1,500 companies represented by the Food Marketing Institute, thank you for the opportunity to comment on options for amending Subpart C of Regulation CC, to provide more flexibility to experiment with methods to return checks electronically.

The Board requests comments on two options for amending Regulatioin CC on notices in lieu of return, whether either of these options would remove impediments to the development of a more efficient payments system, and the advantages or disadvantages these options would provide to participants in the check system.

First, we would like to emphasize that supermarkets are a large participant in the check system. Our industry deposits billions of paper checks annually. There are a number of supermarket retailers who are currently representing returned checks electronically. Because returned checks represent less that .05% of sales, supermarket retailers would like to expand their experience with electronic check truncation to further increase efficiency and reduce handling costs. Supermarket retailers support truncating customer checks at the point-of-sale, where the check information is captured electronically and the physical check is returned to the customer.

Of the options outlined in this notice, we would recommend option two with a slight amendment. We would suggest that the Board amend the U.C.C. Official Commentary which indicates that the U.C.C. would allow return of a notice rather than the physical check in the event the check is being stored in accordance with a check retention system, by adding the language, "or when the check has been processed electronically and returned to its owner." We feel this would be helpful in encouraging more experimentation with electronic check truncation at the point-of-sale.

Electronic check truncation at the point-of-sale could offer benefits in the form of increased efficiency, reduced handling costs and improved customer service at retail stores.

Today, competition for bank depository business is usually limited to banks with cash vaults that are physically located in the same geographical area as a supermarket. Mergers of larger banks are reducing that competition. In the electronic check processing environment, the physical bank vault is no longer the only option for depositing checks — all the information is processed and settled electronically with any bank around the world. This renewed competitive environment has the potential to reduce costs to our industry and ultimately, lower the price of food to our customers.

Thank you for your consideration. We look forward to continuing to work with you on electronic check truncation at the point-of-sale and other ways to increase efficiency and reduce the cost of payments.

Sincerely,