Fed Issues Rules to Make Funds From Checks Available Sooner

The Federal Reserve Board on Wednesday issued rules that require banks, savings institutions and credit unions to meet strict deadlines in making funds from check deposits available to customers.

The new rules, effective Sept. 1, require financial institutions to give customers access to deposited funds within one, three or seven days, depending on the type of check deposited.

Banks have opposed the rules, fearing they would not have enough time to make sure deposited checks will not bounce and are not forged. Consumer advocates, however, say some banks make customers wait longer than necessary before they are given access to their money.

According to staff members, the Fed was flooded by more than 1,000 formally submitted comments after it proposed the rules in December.

The board voted 4-2 to approve the new regulation. One dissenter, Martha Seger, argued that it burdens small institutions with paper work and leaves banks vulnerable to fraud. Board member H. Robert Heller also voted against the rules.

Board member Wayne Angell, who voted to approve the regulation, said legislation enacted by Congress in August left the Federal Reserve with little choice but to adopt it. Angell was joined by Chairman Alan Greenspan, Edward W. Kelley Jr. and Manuel H. Johnson.

Funds from cashier’s checks, certified checks and government checks must be made available for withdrawal by 9 a.m. on the next business day.

Financial institutions will have three days to make funds available from local checks written on an institution in the same metropolitan area.

Funds from checks written on out-of-town banks can be held up for as long as seven days.