Funds availability policies: The good, the bad and the ugly

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Credit union members’ expectations are different today than just a decade ago. Online account access was still evolving and mobile banking apps were clumsy pieces of software capable of performing basic functions at best. Fast forward to 2019 and these are now considered mainstay items. And consumers? Well, they have new demands. Now that most apps offer mobile deposits, consumers want instant access to same-day deposit funds.

However, what does same-day deposit really mean? Let’s break it down with a few real life scenarios, as both sides carry risk.

Funds availability: Offering the right perspective

Fortunately, many consumers understand there are restrictions on funds availability. Just because they make a deposit does not necessarily mean those funds are available for use the same day. However, the good news is that a credit union has discretion. Federal guidelines state when a credit union must release funds. Most have policies which release funds quicker than federal mandates. Even at that though, a credit union can make the decision to make funds available to members earlier. A lot of this depends on the member’s banking history and the type of check involved. Looking at it from a risk perspective sheds light on the issue. Here are some real-life same-day deposit scenarios.

Scenario 1: Your member walks into your credit union with a personal check for $50 from their grandmother. After deposit, those funds may become immediately available for one simple reason: the amount is really low. If this were a third-party check for $500, they might not have access to it until the next day. Yet, a $50 dollar check carries very little risk for your credit union.

Scenario 2: An employer issues your member a paycheck. The amount is $1,500 and they immediately make a mobile deposit. Many credit unions offer same-day access for a mobile deposit if the check is not over $200. If it does, credit unions may issue a credit for $200 of that paycheck, then give your member full access to the remainder the next day. Remind your members that credit unions have discretion. Some may allow members full access to same-day funds if they have an excellent financial history.

Scenario 3: Members deposit a sizeable check to their credit union account that is more than $10,000. Your credit union may hold this check for seven days or longer to wait for the funds to clear. Much of this has to do with Regulation CC as well as risk assessment determined by the credit union. Members may receive a provisional funds credit of a few hundred dollars, then notice that the rest of the funds are released seven to 10 days later.

Keep in mind that your credit union has the most exposure here if you put a policy in place that allows access to funds that haven't been fully received. While your credit union certainly wants to keep your members happy with friendly policies, management and boards should consider protecting the institution’s interest, vision and mission statement as well.

Unfortunately, when members deposit a check with such a large amount, they will not receive access to funds the same day. Tell them your credit union’s funds availability policy. Business membership retention is something to consider with a clear policy difference between your credit union and other financial institutions. Ensuring no surprises when making same-day deposits can improve customer service.

Making access easier

“Same-day deposit” carries huge benefits and a measure of risk for both credit unions and members. Happy members = happy credit union. Highlighting any deposit features available to them through your mobile app like depositing checks via mobile imaging is key. While this may not guarantee same-day access to funds, it will ensure your member’s money is deposited quicker remotely.

Finally, explain ACH and direct deposits. If members have their paycheck automatically deposited, those funds will always be made available in a consistent, timely manner. While Regulation CC states they must be made available no later than the second business day, many credit unions make them available the same day.

How about cut-off times? Make this information available on your site, social media, emails and newsletters. Also, specify time zones, transfer cutoffs, bill-pay cut-offs vs. same-day deposit cut-offs.

The only thing required for this to happen is an ACH or direct deposit form. Any good forms provider will make sure these are available for you to use. Typically, these can be found in member onboarding packets. You may also want to check your disclosure pamphlets for updated funds availability policies.

How unique is your CU?

If your credit union allows members to access their funds quicker, tell them! For instance, for new accounts, do you allow same-day or next-day access for deposits totaling $5,000 or more, or do you allow partial access next day and wait the remaining nine days before allowing full access?

Both the member and the credit union could be at risk if there was an issue with funds deposited and those funds were made immediately available. The credit union would have to take the steps to reverse the transaction and the member could have already used those funds. When a member sees available funds in their account, they tend to spend it, and if the credit union were to reverse the transaction, those funds might cause items to bounce.

Ultimately, let new and current members know they can always ask if they have a question about funds availability. As such, processing information takes time and will probably occur in stages as they explore their new member packet. Access to cash may not even be on their radar at the moment, even though the expectation is likely there. A little conversation goes a long way, and answering questions about funds shows your team is helpful and fearless.

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Deposits Consumer banking ACH Mobile banking
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