First National Bank in Pennsylvania now is allowing customers same-day access to funds from most deposited local checks — no matter what time they get to the bank.
The unit of the $6.1 billion-asset F.N.B. Corp. in Hermitage says it is the only bank in its market offering the service.
Consumer advocates are applauding First National's efforts and are hoping other banks will follow suit. The Check Clearing for the 21st Century Act has vastly expedited banks' ability to settle checks, and advocates say it is time for banks to reduce hold times for all checks — local or out-of-state, small or large.
In the meantime, one analyst said that First National's service should give it an advantage in competing for core deposits in its market.
First National launched its "Same Day Banking, All Day" service this month. Deposits of local checks will be posted at the end of the business day of each branch, instead of the prior 3 p.m. cutoff time. Most of the bank's branches close at 5 p.m. or 6 p.m., but some are open until 7:30 p.m. Deposits made on the weekends are posted the next Monday.
Retail customers benefit because they have immediate access to funds from local checks, no matter how late in the day they are deposited, said Jonathan Roberts, First National's executive vice president of retail banking. Moreover, customers depositing checks late on Fridays can use the funds during the weekend.
Business customers cannot cash checks immediately, but checks are posted that day, so any other checks that come in against the account that day would be covered.
"Business customers no longer have to race to the bank during midday to try to beat the cutoff time, so that they can ensure that their deposits are posted if there are pending transactions," Mr. Roberts said. "This positions them to better manage their cash flow."
Furthermore, tellers do not have to close their windows during peak hours to settle their drawers, reducing the frustration of customers waiting in lines, he said.
First National was able to extend its cutoff time until the end of the day by "creatively" tweaking its logistics in getting checks from each of the branches to the bank's processing centers, Mr. Roberts said — but he did not want to tip the bank's hand to competitors and explain the new process.
Bob Rimbey, the senior vice president of retail operations, says that even though large-dollar and nonlocal checks also are posted the same day, the funds may not be available until a later date. In those cases, it is up to the discretion of the branch manager whether to hold the checks, depending on the customer's relationship with the bank — a policy that most banks already have, he said.
The availability of funds has become an increasingly important issue to consumers and business owners, particularly after the 2003 enactment of Check 21, which makes it easier for banks to clear checks electronically and significantly reduce float time.
Gail Hillebrand, a senior attorney in the San Francisco office of Consumers Union in Yonkers, N.Y., said that she knows of no other banks offering same-day access to funds when checks are deposited late in the day.
"This will help consumers avoid unpleasant surprises and potential bounced-check fees if they deposit their paychecks at the end of the day on Friday and go grocery shopping on Saturday — but only if it's a local check," Ms. Hillebrand said.
(First National, like many other banks, also gives customers immediate access to direct-deposited payroll checks from nonlocal employers.)
Ms. Hillebrand contends that more needs to be done within the banking industry to shorten the hold times for nonlocal or large-dollar checks.
Her advocacy group is lobbying the Federal Reserve Board to shorten the maximum hold periods for such checks, because consumers have been complaining that too many banks continue to hold checks for the maximum period (which varies according to the check amount and whether it's local or out-of-state), she said. As a consequence, many credits in consumers' accounts have been clearing faster than their deposits.
"Even if the time is shortened, banks can still have safeguards if there is a particular check that looks no good," Ms. Hillebrand said. "Banks can just change the general rule and shorten hold times when there are no danger signs."
According to a Fed spokeswoman, Check 21 requires the agency to study whether maximum hold times should be shortened and then report back to Congress within three years of the act's effective date — April 28, 2007. The spokeswoman also said that the Fed has publicly said that it was open to amending Regulation CC to reduce hold times.
Christopher Marinac, an analyst at FIG Partners LLC in Atlanta, said that First National's new service could give it a leg up on other banks. Though First National loses out on the float if funds are withdrawn as soon as they are deposited, the service is a selling tool that could lead to more core deposits, Mr. Marinac said.
It should not be too long before more banks follow suit, he said.
"As more customers become aware that banks are making money off of them with longer float times, they'll become more demanding and ask for reduced float," Mr. Marinac said. "It's the same dynamics that's reducing pricing on loans, because more customers are realizing that they don't have to pay up — they can just demand better deals."
