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Rethink rules that prohibit remote deposit

I love my credit union. I’ve been a member for many years and my relationship with them has steadily grown.  I use online banking for money transfer, bill pay, a personal finance manager (PFM), and even an integrated link to Turbo Tax. In return, my credit union gives me competitive rates on loans, better than average interest rates on share and draft accounts, great customer service, and no worries about nuisance fees.

Last year I opened a custodial share account for my daughter. She is the primary owner of the account but my name is on it until she reaches legal age. This account is not for her college education, rather it is her savings account for the money she earns. She can use it when and how she likes and that was the agreement when I took her to open the account. I want her to start managing how she spends her money.

Last week we experienced the first hiccup with her account. She received two checks for baby-sitting and wanted to deposit them. No problem I thought, we can deposit them through the remote capture service that is part of online banking. I use this feature frequently with my own accounts and have come to love the flexibility it gives me to make deposits after normal business hours.

Her share is allowed to access online banking.  But when we signed-in to send the check image I found that the feature was disabled for her account. That was disappointing to say the least, but I had another check to deposit into my own account so I decided I would deposit the two at a Credit Union service center the next day. (The nearest CU branch is 25 minutes away compared to five minutes to the nearest service center.)

When I tried to deposit the check into her account at the service center, the teller told me that she could not process the transaction because it was blocked (a second failed attempt to deposit funds). So I had to call my credit union from the service center to ask about the block. I guessed it had something to do with her age and I was right. What I didn’t expect was the reason.

The lady in Member Services told me that my daughter didn’t have a beacon score and thus she was not allowed to make remote deposits. However, after reviewing my status they lifted the block so that we would be allowed to make deposits for her from credit union service centers. I thanked her for this and then asked if she could do the same for the remote deposits via online banking. After placing me on hold for several minutes she came back on the line and told me that they could not lift this restriction because she did not have a beacon score. At this point I politely thanked her for researching my question and then completed my deposit at the service center.

On my way home I tried to think of a rational explanation as to why the credit union would enforce a rule prohibiting a deposit into an account.  The only thing I could think of was that it was a means to reduce the risk that someone would knowingly deposit a bad check.  But isn’t that what the two day hold on check deposits was to setup to achieve?

So I looked up “beacon score”.  Investopedia defines a beacon score as a “number generated by Equifax Credit Bureau to rank an individual’s credit-worthiness.” So in other words it’s the credit score to show how likely an individual is to repay a loan.  Beacon is the term used by Equifax and was replaced by the term Pinnacle in more recent years.

So back to my story and the reason for this blog post. It still doesn’t make sense to me why my daughter can’t remotely deposit money into her account. Justifying the policy on the basis of her credit score makes even less sense to me. This isn’t about a loan payment, a loan application, or a credit check. She just wants to put the money she earned into her bank account.

Remote deposit is a growing feature for account holders at financial institutions across the country.  I’ll admit the idea seemed risky when I first read about it years ago. But it’s a natural expansion of the Check 21 Act where financial institutions started using digital check images instead of mailing them to each other.  BankDirector.com listed remote deposit capture as one the top 10 technologies for banking in an article published last June. The BankDirector article also noted that industry leader USAA reported that members deposited more than 450,000 checks in the first five months of their mobile deposit capture product.

I’m trying to encourage my daughter to save her money and use a credit union. With the continued expansion of technology and capabilities her generation is sure to use physical branch locations less than my generation.  Restricting her from using remote deposit just doesn’t make good sense for her or the credit union. It’s time to remove this prohibitive policy and make remote deposit capture services available to all members.

UPDATE: A few days after posting this I received a call from the VP of Operations at my credit union. We discussed the basis for the business process described in this post. They gave my account and override to allow remote deposit. As I think about it now, I believe this kind of background check should be performed at new account opening (which it often is). If a person is worthy to have an account (based on risk score) then they should also be trusted enough to perform remote deposits.