New Cheque Clearance Rules

MSE_Martin

APACs, the organisation responsible for banks payment clearance has just announced a new cheque regime starting on 30 Nov. Below is the press release of its announcement.

Do note though, as it's a press release from the organisation doing it do take any triumphalism with a pinch of salt!

Martin

________________________________________________________

Start date announced for important changes for customers paying in cheques

• From 30 November changes to the cheque clearing process come into effect
• Changes to provide certainty and increased transparency for business and personal customers when paying in cheques

The UK banking industry has today (26 November 2007) announced the start date for changes to cheque clearing processes. The changes, known as 2-4-6, are a major development that will benefit anyone who accepts a cheque, banker’s draft or building society cheque. The changes will apply on all cheques paid in to major banks and building societies in the UK with effect from this Friday (30 November) onwards. The changes will deliver two benefits for customers:

Increased certainty - For the first time, after paying in a cheque, customers can be sure that at the end of six working days, the money has safely cleared and they are protected from any loss if that cheque should subsequently bounce1.

Improved clarity about clearing timescales - The changes set maximum timescales for the day that customers can expect to earn interest, or when the balance on which overdraft interest is charged is reduced (no later than two working days after paying in a cheque). They also set maximum timescales for the day when money can be withdrawn (no later than four working days after paying in a cheque). Banks and building societies will still compete to offer services that beat these guaranteed limits.

In research commissioned by the Cheque and Credit Clearing Company2, less than a quarter of cheque users surveyed knew the correct timescales for cheque clearing, and more than half were worried about accepting cheques for fear they may bounce.

The 2-4-6 changes address these uncertainties, and provide guaranteed maximum time limits on cheque clearing to help businesses and personal customers decide how best to manage the cheque payments they receive. Angela Thomas, Cheque and Credit Clearing Company Managing Director, said:

“Although cheque use has fallen over the last few years, cheques remain important for certain customers in certain situations. Whether it’s a small business or someone selling a car, there are many occasions where cheques still get handed over. These changes will really benefit anyone paying in a cheque, offering them certainty and clarity on when the money has cleared and giving real peace of mind.”

Despite the positive change, the industry continues to remind customers to be wary of accepting cheques if they don’t know or trust the person offering them the cheque. Other options include CHAPS or making an online or phone payment.

Any customer who is uncertain about clearing timescales for a particular cheque should check with their bank or building society.

To explain the changes, the Cheque and Credit Clearing Company and APACS have issued downloadable advice guides and a range of information for personal and business customers, available free from their websites, www.chequeandcredit.co.uk and www.apacs.org.uk.

These changes cover cheques, bankers’ drafts and building society cheques drawn on and paid into a UK current or basic bank account. For saving accounts the maximum time limit for withdrawal is longer (six days instead of four). Basic bank account holders are likely to be able to withdraw cash more quickly than before as a result of these changes. Small businesses will benefit from the certainty of funds for managing their cash flow, and for deciding when to release goods and services that are paid for by cheque.


ENDS

1. APACS is the trade body that gives banks, building societies and card issuers a forum where they can work together on non-competitive issues. In a nutshell we help manage the way that businesses and individuals in the UK move their money around - this covers cash, credit and debit cards, cheques and automated payments such as direct debits, salary payments and online/phone transactions. We champion the fight against banking fraud and twice a year we publish figures on payment industry fraud losses.

2. The Cheque and Credit Clearing Company (C&CCC) is a membership-based industry body which manages the cheque clearing system in Great Britain. There are 12 members; eleven banks and one building society:

ABBEY NATIONAL
ALLIANCE & LEICESTER
BANK OF ENGLAND
HBOS (HALIFAX AND BANK OF SCOTLAND)
BARCLAYS BANK
CLYDESDALE BANK
The CO-OPERATIVE BANK
HSBC BANK
LLOYDS TSB BANK
NATIONAL WESTMINSTER BANK
NATIONWIDE BUILDING SOCIETY
The ROYAL BANK OF SCOTLAND

All members of C&CCC will be implementing these changes at the end of November.

3. The changes are also being implemented at the end of November by all members of the Belfast Bankers Clearing Committee. The BBCC represents the cheque clearing banks in Northern Ireland, which are Bank of Ireland, First Trust Bank, Northern Bank, and Ulster Bank.

4. The 2-4-6 changes were announced in November 2006, following work undertaken by the industry as part of the Office of Fair Trading Payment Systems Task Force’s cheques working group. All subscribers to the Banking Code have committed to implementing these changes.

1 Unless they are a knowing party to a fraud

2 Banking Omnibus Survey (TNS 2007)

Beate

Thanks, so in a nutshell the 2-4-6 rule means cheques
earn interest after 2 days
money can be withdrawn after 4 days
and clear after 6 days?

peterbaker

Thanks for the nutshell version, Beate ... I was scratching my head about the 2 and the 4 until I reached your post

JohalaReewi

So what about the scam cheques where you get a cheque overpaying for an item and you bank the cheque and refund the difference. Does this mean after 6 days, the scammer's cheque won't bounce?

olly300

JohalaReewi wrote: »

So what about the scam cheques where you get a cheque overpaying for an item and you bank the cheque and refund the difference. Does this mean after 6 days, the scammer's cheque won't bounce?

The apacs links states this:
"Increased certainty - For the first time, after paying in a cheque, customers can be sure that at the end of six working days, the money has safely cleared and they are protected from any loss if that cheque should subsequently bounce*."

"*Unless they are a knowing party to a fraud"

Therefore I would interpret this as the bank would try and argue that the overpayment of a cheque made you a knowing party to the fraud.

Biggles

I notice the banks have backed off the original version which, I understood, meant that after 6 working days the cheque could not bounce.

Now it only says your are protected from any loss if it should bounce.

Suddenly, especially after reading Olly's post above, I'm a lot less certain about what form the protection will actually take. I had believed that, after 6 days, the cheque couldn't bounce and there could be no problem for you. It now looks as though a cheque could bounce, and it could then be up to you to go to the bank and argue your case? I hope that's not the way it will work.

olly300

Biggles you explained it better then I did.

All I understand from the announcement is that some banks/building societies have accounts normally building society savings accounts, where it takes 7 days for them to clear a cheque and apply interest. This process forces them to speed this up.

I don't see any additional protection for people who cash fraudenlent cheques by mistake.

Biggles

olly300 wrote: »

I don't see any additional protection for people who cash fraudenlent cheques by mistake.

I hope that they are, as stated, 'protected from any loss' and that it's only actual participants in a fraud who are not. I just hope you won't have to argue that point with your bank every time a scammer stops a cheque to you.

James

I wonder why UK Banks don't adopt the U.S. system being used by an ever increasing number of US Banks. If you were presented with an Cheque from a US Bank, and although you weren't a member of that bank. You can withdraw cash against that cheque there and then.

Details Click here: (Excuse spelling of cheque (check), but it is a US site).

You too can use the same concpet too in th UK to protect yourself from ID Theft.

www.freeidprotection.co.uk

Milarky

'30 November' - a Friday! You wouldn't want to be paying a cheque in that day would you? But the reason it's 30 November is because we were promised this 'by' November 2007. So they can claim not to have actually broken their word - just stretched the meaning of that little word 'by'

Biggles

James wrote: »

I wonder why UK Banks don't adopt the U.S. system being used by an ever increasing number of US Banks. If you were presented with an Cheque from a US Bank, and although you weren't a member of that bank. You can withdraw cash against that cheque there and then.

I think that's a completely different topic, though.

This thread is really talking about paying a cheque into your account, that is drawn on a different bank & branch.

The US system you linked to is really about you (usually an employee) taking a check (usually your pay check) into the bank on which the check was drawn. So the bank know the money is there in the account (ie that the check isn't going to bounce) but they just need some sort of ID for the payee. And even then, they are starting to make a charge for each check.