New law gives depositors quicker access to funds > Some banks already following rules, saving consumers millions of dollars

WASHINGTON — Starting Saturday, Americans will be guaranteed quicker access to their bank deposits because of a law already credited with saving bank customers millions of dollars annually.

While consumer groups have been touting the benefits of the Expedited Funds Availability Act, banking groups are fighting to roll back what they consider the most onerous sections of the legislation.

At present, however, the law remains on the books and beginning Sept. 1, banks will be forced to meet shorter time limits for making funds available on deposited checks.

Local checks must be cleared by the bank in two business days, down from three days. Non-local checks must be cleared in five business days, down from the current seven business days.

A local check is defined as one written on an institution in the same metropolitan area or within the same Federal Reserve check processing region.

Money deposited in the form of cashiers’ checks, certified checks and government checks must be available to depositors by 9 a.m. the next business day. This time frame represents no change from interim regulations banks have had to meet since Sept. 1, 1988.

Many banks are already processing checks in the shorter time periods going into effect Saturday. Those banks that have been using the longer interim standards will be required to notify their customers within the next 30 days that their funds will be available more quickly.

Before Congress passed the law guaranteeing bank customers quicker access to their money, bank performance varied widely around the country.

Consumer groups that lobbied for the changes complained that many banks were freezing funds for as long as two or three weeks in a practice banks referred to as putting a “hold” on deposited checks.

The U.S. Public Interest Research Group, which lobbied aggressively for the 1987 law, said banks were making $290 million annually in interest on the money withheld from customers during the so-called “float period,” the time between when the bank got credit for the funds and when it released the money for use by the depositor.

In addition, the consumer research group charged that banks were collecting another $145 million a year in bounced-check fees because funds weren’t released faster for depositors’ use.

In the two years in which the interim regulations have been in effect, consumer groups contend the law has worked well, allowing depositors with interest-bearing accounts to make millions of dollars more because of the shorter “hold” periods on checks.

“We think the law is working well to make the holdup at the bank a thing of the past,” said Ed Mierzwinski, consumer advocate at the U.S. Public Interest Research Group.

However, banking groups have been lobbying Congress to make changes in the law. A bill giving banks more leeway was approved by the Senate Banking Committee in July.

Under that measure, which is expected to be taken up by the full Senate in September, banks for the next four years would be given a longer processing time for certain checks deposited at automated teller machines.

Mark Serepca, a spokesman for the American Bankers’ Association, said a recent survey by his organization found that 20 percent of banks will just stop accepting deposits at teller machines unless the customer has an account at the bank whose teller machine he is using.

“Many banks are telling us they won’t offer the expanded service any more because they fear the risk of too many bad checks,” Serepca said.

While consumer groups said they would be willing to accept longer processing time for certain automated teller deposits, they vowed to fight another proposal that would keep the processing time for all local checks at three days instead of the two-day limit that takes effect Saturday.

Officials at the Federal Reserve, which administers the check cashing law, said they were worried that the two-day time limit was too short and would invite fraud.

But Mierzwinski said the Fed’s own surveys showed that up to 75 percent of banks are already processing local checks within the two-day limit without any difficulties.