Despite opposition from the banks and misgivings by much of the savings and loan industry, the Federal Home Loan Bank Board is moving toward giving savings associations the authority to offer checking accounts.

They won't be called checking accounts, they'll be known -- at least inside the financial community -- as payment order accounts.

But unless consumers read the fine print and notice that payment orders say "pay to" rather than "pay to the order of," they'll have difficulty telling the two financial instruments apart.

Like the accounts offering automatic transfer from savings to checking recently started by banks, S&L payment order accounts will allow consumers to keep their money in a savings account, earning interest, until they write checks.

Payment order accounts are the Federal Home Loan Bank Board's suggestion for allowing savings and loans to compete with the bank's automatic transfer accounts.

Bank board Chairman Robert H. McKinney took the first step toward authorizing S&L payment order accounts last month after a federal judge threw out a lawsuit attempting to block banks from using automatic transfer accounts.

The U.S. League of Savings Associations -- the largest S&L trade association -- sued unsuccessfully to prevent the Federal Reserve Board from allowing banks to offer the automatic transfer plans.

Savings industry officials contended that letting banks pay interest on checking accounts would drain money out of thrift institutions. They claimed that the loss of deposits would lead to a shortage of mortgage money.

The response of the Home Loan Bank Board -- which regulates S&Ls just as the Federal Reserve regulates banks -- was payment order accounts.

Saying he hoped to have a final decision on POAs by Christmas, McKinney trimmed several weeks off the usual comment period, giving supporters and objectors until last Friday to respond to the broad policy initiative.

Yesterday the reactions were still coming in, and more than 200 comments had been received.

Although POAs are meant to be a competitive plus for S&Ls, the response from the U.S. League of Savings Associations was cautious. Citing previous proposals to broaden the powers of S&Ls, the League warned that the changes "would, in effect, make savings and loan associations into second class banks."

Citing half a dozen administrative problems, the league urged a delay of "several months" before POA rules are implemented.

In a letter this week, Norman Strunk, executive vice president of the U.S. League, objected to McKinney's proposal to let S&Ls pay only 5 percent interest on POAs rather than the 5 1/4 percent interest paid on all other S&L accounts. That could be the first step toward eliminating the thrifts' traditional interest advantage over banks, he warned.

But the proposal drew broad praise from the other big industry group, the National Savings and Loan League.President Harold W. Greenwood Jr. said the proposal "will mean that families who have accounts with savings and loan associations will be able to write what amounts to a check from those accounts.

"It amounts to having a checking account that pays interest," said Greenwood, whose group has pushed for checking powers since 1970.

William H. Smith, general counsel to the American Bankers Association, lambasted the proposal as "hastily conceived... prematurely delivered and badly underdeveloped."

Arguing that only Congress has the authority to give S&Ls checking power, Smith said the POA proposal, "which makes the savings funds of customers more easily accessible for spending, is clearly inconsistent" with the role Congress has assigned the savings institutions.

Raising legal and technical arguments that eventually could find their way into a lawsuit, Smith also urged delays.

Payment orders are the latest intrusion into the banks' traditional monopoly on checking and the latest challenge to the principle that checking accounts do not pay interest.

The trend began in 1972, when New England financial institutions got permission to experiment with negotiable order of withdrawal (NOW) accounts. NOWs are checking accounts that pay interest.

By the beginning of this year, there were 1.8 billion NOW accounts in New England. Last month, banks in New York got permission to offer NOWs.

Banks in the rest of the country still are prohibited from paying interest on checking accounts, but as of last month can offer automatic transfer service. Customers maintain separate checking and savings accounts, keeping all their cash in the interest-bearing savings accounts until they write a check. Then the bank automatically transfers funds to the checking account to cover the check.

Credit unions have their own versions of checks, called share drafts. Last year, credit union members wrote almost 100 million share drafts on credit union accounts which pay up to 7 percent interest.

Like share drafts and NOWs, POAs will be cleared through the Federal Reserve's regular check clearing service.

Chase Manhattan Bank already has formed a system to process POAs and has been offering it to savings and loan associations since a couple of days after McKinney announced his plan.

Chase acts as a correspondent bank for some 200 savings and loans already. It also runs the largest clearing system for credit union share drafts, and processed about 50 million of them -- 55 percent of the nation's total last year.

George Miles, a Chase Manhattan vice president for institutional banking, said the plan is to clear the POAs through the same system now used to handle share dafts.

Chase's plan is for what is called a "truncated" system, in which POA users would not get back their cancelled checks, but would get a monthly statement showing what checks have been paid.

Federal regulations require credit unions to use a "truncated" system for share drafts, and some bankers are pushing the system for all checking accounts. The ABA estimates banks could save $5 billion a year if they stopped sending back cancelled checks.

The Federal Reserve estimates it costs 33 cents to route a paper check through its clearing system, but only 18 cents to handle the whole system electronically, eliminating the paper shuffling.

If all checking systems eventually will be "truncated," it make no sense to set up a paper system for the S&Ls, argues Chase's Miles. He said there are few consumer complaints about the lack of cancelled checks, which can be obtained if a customer needs them as proof of payment.

The Home Loan Bank Board says it doesn't care whether the POA processing system is "truncated."

There will be one big difference, however, between a POA and a bank check. The federal law that FHLBB officials say permits POAs requires them to be nontransferable and nonnegotiable.

Even financial industry lawyers are reluctant to define and differentiate those terms. Basically they mean that if a POA is made payable to one person, that person cannot transfer it to another person as he or she could with a check by endorsing it on the back.

The party to whom a POA is written will be able only to cash the instrument or deposit it in an account.

Although the U.S. Savings and Loan League contends nontransferability will make POAs "inferior" to checks, Home Loan Bank Board officials see few problems. The overwhelming majority of checks aren't transferred, they note, and POAs are not intended to eliminate all need for checking accounts.

Assuring nontransferability is why the POA form will say "pay to" rather than "pay to the order of," because the document legally only can transfer funds to the party named on it.