Banks to Withdraw from Federal Rule on Check Deposit Availability

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In an effort to minimize risk to depositary banks, the federal government has announced plans to withdraw from a rule governing check deposit availability. This change aims to reduce the risks faced by depositary banks when processing checks from out-of-state or out-of-jurisdiction paying banks.

Background on the Rule Change

The current rule, which has been in place since 2010, requires depositary banks to make funds deposited by check available for withdrawal within a certain timeframe. However, under the new plan, banks will no longer be required to adhere to this schedule for checks deposited at branches located in:

• Alaska
• Hawaii
• Puerto Rico
• American Samoa
• The Commonwealth of the Northern Mariana Islands
• Guam
• The U.S. Virgin Islands

How the Rule Change Affects Check Deposits

The new rule will allow banks to extend the time period for making funds available for withdrawal in these jurisdictions by one business day. For example, a check deposited in a bank in Hawaii and drawn on a San Francisco paying bank must be made available for withdrawal not later than the third business day following deposit, rather than the second business day as previously required.

Additionally, deposits made at nonproprietary ATMs will now have to wait five business days before funds are made available for withdrawal. This is an extension of the current two-day availability period for these types of deposits.

Impact on Banks and Consumers

The move is seen as a win for banks, which were facing increased costs and risks associated with processing checks from out-of-state or out-of-jurisdiction paying banks. However, consumer advocates have expressed concerns that the change will make it more difficult for people to access their money quickly.

Timeline for Implementation

The new rule is expected to take effect in the coming months, pending final approval from regulators.