End of cheque guarantee system

JuicyJesus

ERICS_MUM wrote: »

My use of the word "cleared" was wrong, I agree. Obviously the draft has to go through the clearing process for the funds to be exchanged between the two banks, and for the drawer's bank to complete the technical checks.

I should have said that payment of bank drafts cannot be stopped by the drawer, funds have already been taken from his/her account and are held by their bank. I believe postal orders work in the same way (i.e. bought and paid for "up front").

If this too is wrong, could you explain it to me please.

A proper banker's draft, drawn correctly, will go through fine, and cannot be stopped. A counterfeit one, obviously, won't go through. The problem is, most people accepting have no idea what a proper banker's draft looks like (or, more precisely, what the differences are between a real one and a counterfeit) and probably won't examine it too closely. A lot of counterfeits are reasonably good in quality, and unless you have an ultraviolet lamp and/or are paying a lot of attention most people will probably not be able to tell the difference.

There is also a distinction between bankers' drafts and building society cheques which many are unaware of - unlike bankers' drafts, building society cheques CAN be stopped: see http://www.financial-ombudsman.org.uk/publications/technical_notes/transfers-payments-and-cheques.htm#3 under the heading "drafts and counter cheques".

My point, in saying all this, is that these are ways in which the continuing use of cheques (and cheque like objects, e.g. drafts) put consumers and small businesses at a complete disadvantage. Should you pay in a counterfeit draft (or any counterfeit cheque in general) or a stopped building society cheque, and you hand over goods or withdraw the money before day 6 in the clearing when the cheque/draft is fully cleared for fate, you're the one who loses. The bank won't reimburse you because it isn't their fault that you chose to draw against the cheque/draft before it was fully paid. You also then open yourself up to overdraft charges, a massive overdraft to repay and possibly a charge for the bouncing of the cheque itself.

This is ignoring the whole issue of people receiving "drafts" in the post and then being asked to remit some of the money back before it inevitably gets returned unpaid, a scam that solely affects the consumer who falls for it and simply could not happen in any effective way without cheques being involved.

Meanwhile, if you accept an FPS transfer instead then you have the money in your account, safely and as cleared funds, within two hours. BACS? Three days, tops.