Cheques to clear faster

Bank account holders who have paid a cheque into their account will benefit from faster withdrawal times and more interest from 30 November.

The problem of cheques never clearing was first exposed by the BBC Moneybox programme a few years ago and since then, the Office of Fair Trading has been putting pressure on the banking industry to clarify the clearing system.

Under new rules published yesterday, UK banks and building societies will have to pay interest on money paid in by cheque after 2 working days and customers will be able to withdraw money after 4 days if they are paying into a current account. They are also guaranteed that the cash is theirs after 6 days, even if the cheque bounces.

Research by the Cheque and Credit Clearing Company, authors of the new rules together with Apacs, the payments body, established that less than 25% of cheque users surveyed knew the correct timescales for a cheque clearing.

Lloyds TSB, for instance, pay interest on a cheque once it has been deposited. Competition in the industry following the new rules should mean that this will become more widespread.

In the past, banks have always been able to recover money from a customer’s account if a cheque bounced or proved to be fraudulent. This was even the case if the discovery occurred weeks or months after the event and after the cheque had been formally cleared and the money spent. Cheques never really cleared with absolute finality but this will change from Friday.

Angela Thomas of the Cheque and Credit Clearing Company, said although the use of cheques has declined somewhat over the last few years, cheques remain important for many 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.

The new changes mean anyone paying in a cheque will have peace of mind.

Discuss this in the Finance Markets forums

Story link: Cheques to clear faster