BankAmerica Corp. has reversed a decision to end its direct deposit service to the San Francisco Unified School District.
The original decision, which BankAmerica attributed to the school system's outdated technology, caused a public relations flap. Effective Jan. 1, it would have affected several hundred employees whose pay is regularly posted to BankAmerica accounts.
Harvey Radin, a spokesman for the Charlotte, N.C.-based banking company, said BankAmerica has decided to continue the service until the schools modernize their payroll system. It will also help the school district upgrade its technology early next year.
"Our reasoning is that we work with all our customers and try to be as accommodating as possible," Mr. Radin said Wednesday. "I think we have done the best we can for the school district."
The bank notified school officials and employees in a Nov. 19 letter that it planned to discontinue the service, which entails physically carrying checks to branches for posting to accounts.
The process is more costly and susceptible to error than the more modern and common automated clearinghouse method of direct deposit, observers said.
"To manually enter paper checks in a situation like this is mind- boggling," said R. Jay Tejera, an analyst at Dain Rauscher in Minneapolis.
But BankAmerica's initial decision angered employees and officials at the schools, who had expected the institution to continue providing the manual direct deposit service until the district could handle automated direct deposit.
"BankAmerica said they didn't realize that this was going to be such a big problem for us," said David Chan, director of payroll operations for the schools.
Mr. Chan said BankAmerica's about-face was due in part to a sensitivity to the criticism it has gotten from city officials, who accused the formerly San Francisco-based company of losing its hometown focus.
"I think this is a reaction to other negative exposure they have been getting," Mr. Chan said. "Whatever the reason, we are surprised and relieved they changed their minds."
Meanwhile, three members of the San Francisco Board of Supervisors have asked the city treasurer to freeze any new business with BankAmerica until Jan. 31.