Law Meant to Ease Access to Deposits Causes Confusion

Some consumers are finding that getting access to funds deposited in their bank accounts is being slowed by a new federal regulation that is supposed to make deposits available faster.

For instance, when S. Michael Marasa went to Fidelity Federal Savings & Loan in Northridge to deposit a check Friday, he was told that the funds would not be available for three days.

“The teller told me a new federal regulation required a three-day hold,” Marasa said. “I told them that was ridiculous. I have always had next-day availability.”

The teller was mistaken about the requirement, according to John W. Gleason, a vice president at the Federal Reserve Bank in San Francisco.

“Financial institutions are entitled to hold a local check for three days,” Gleason said. “They are not required to. The law is really just a limit to how long a bank can put a hold on a check. There is nothing that obligates a bank to put a hold on a check.”

Gleason said Fed officials had heard that some institutions were imposing across-the-board holds, but he said he did not think the practice was widespread.

The law, which took effect Thursday, requires banks, thrifts and credit unions to make funds deposited into accounts available within specified periods of time. For local checks, the time limit is three days. For non-local checks, the period is seven days. Customers must be advised if the institution intends to hold funds longer.

Most California banks and savings and loan firms give established customers access to their deposits the next business day. But some institutions, such as Fidelity Federal, are ending that practice as a result of the new federal law.

Uniform Treatment

Shirley M. Giusa, a vice president at the Glendale-based thrift, said the three-day hold on all local checks is an attempt to treat customers uniformly. “We haven’t had any complaints,” Giusa said.

Some other big banks and thrifts, however, said they are maintaining their old policies of granting next-day availability to established customers.

“We leave it pretty much to the discretion of the branch managers to decide how quickly to give access to customer check deposits, within the federal guidelines,” said John C. Kaufman, a spokesman for California Federal Savings & Loan.

The state’s four biggest banks--Bank of America, Security Pacific, Wells Fargo and First Interstate--also have not changed their policies on next-day availability of funds for established customers.

The new law is causing problems for businesses that process a lot of checks. New standards in the law set aside a specific area on the back of checks for bank endorsements. Some banks are trying to force business customers to adhere to the standard, although the federal regulations do not pass on the obligation to non-banks.

In addition, some banks have told customers mistakenly that carbon-band checks, which are popular among small businesses, are no longer legal. That assertion is untrue and carbon-band checks are legal. But representatives of the carbon-band industry said the banks are damaging its business.

“We are at great peril because of a misinterpretation on the part of the banks,” said Quinn Kern, president of Dealerforms, a Santa Fe Springs maker of carbon-band checks. The checks simplify bookkeeping by transfering information into logs when the check is written.

Kathleen R. Barker, executive director of the Washington-based lobbying association for the makers of carbon-band checks, said some banks have banned carbon-strip checks and are pushing their own brand of carbonless checks.

The Federal Reserve considered banning carbon-band checks because the carbon runs through the area designated for bank endorsements. But the proposed ban was scrapped after an outcry from the industry and small businesses. Instead, the Fed encouraged banks to design endorsement stamps so that the nine-digit number identifying the bank avoids the carbon area.