BankAmerica Corp., already facing numerous public relations challenges in its former hometown, now has the San Francisco Unified School District to deal with.

The banking company has angered school officials by announcing it will end the district's direct payroll deposit program on Jan. 1 because the schools' technology is not up to speed. School officials said the decision leaves about 600 teachers and other workers in the lurch.

"It is unconscionable and unprofessional for them to abandon us this way," said Glenston Thompson, director of business services for the school district.

From a public relations perspective the decision comes at a bad time for BankAmerica, which shifted its headquarters from San Francisco to Charlotte, N.C., after it merged Sept. 30 with NationsBank Corp.

The company has gotten an earful of criticism from political officials and community activists who are concerned that BankAmerica is reducing its commitment to San Francisco and California.

Just this week, Sen. Barbara Boxer, D-Calif., sent a letter to BankAmerica chief executive officer Hugh McColl to "express my very serious concerns" about such things as the departure of former president David Coulter, resignations of some female executives, and Community Reinvestment Act commitments.

A BankAmerica spokesman said the Boxer letter was "based on a number of misconceptions."

Mr. McColl had not responded to Sen. Boxer as of press time Thursday. However, he sent a memo to employees in response to press reports about the departures of the women, standing by BankAmerica's record as an "inclusive meritocracy."

Regarding the direct-deposit decision, University of San Francisco finance professor Richard D. Puntillo said: "Somebody at the bank was not thinking this through. This decision was certainly driven by economics, but you can't have a tin ear to the public relations part of this."

The $572 billion-asset bank revealed that it would end the direct deposit service in a terse, three-paragraph letter sent last month to school district employees.

Signed by BankAmerica vice president Kathie Milburn, it offered no explanation and referred questions to the school district's payroll department.

A BankAmerica spokesman explained that under the current system, school employees' checks are physically sent to bank branches, where they are posted to accounts. This manual approach-in contrast to the more modern and common automated clearinghouse method-is not cost effective and is highly susceptible to errors, said the spokesman, Harvey Radin.

"We have addressed a number of complaints from school district employees who have experienced errors caused by the old manual direct deposit system," he said. "We encourage the use of electronic direct deposit. It is faster and more accurate."

San Francisco's labor-intensive system was necessary because the school district lacked the technology to use electronic fund transfers, said David Chan, director of payroll operations for the schools. However, he said, the district is planning to upgrade to a modern payroll system early next year.

Mr. Thompson said BankAmerica likely would have been chosen as the schools' clearinghouse after the switch, but added that the bank's recent decision may work against it.

"We would have expected them to keep the current service going until we changed over," Mr. Thompson said. "It is unfair to abruptly discontinue this service. We may have to take our business elsewhere."

"It's a shame," said Brian Lee, principal of the A.P. Giannini Middle School, named for BankAmerica's celebrated founder. "Giannini and his bank were always there to help the little guy, and now things have become totally money-oriented."

The City of San Francisco uses BankAmerica in several other capacities, including checking, deposit processing, welfare check cashing, and wire transfers.

City Supervisor Michael Yaki this week directed San Francisco's treasurer to compile a list of the city's contracts with the bank. He threatened to end some of the contracts if BankAmerica does not offer more specifics regarding its community development commitment to California.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.