It seems we just can't win with the banks

Jun 4 2009 by Peter Jackson, The Journal

BANKING staff are giving confusing and inconsistent advice to customers when it comes to cheque clearing times, according to a banking watchdog.

According to the Banking Code Standards Board, many staff appear confident, even when getting it completely wrong, and the situation is worse than it was a year ago.

Frankly, I’m not surprised. It doesn’t seem that long ago that a cheque cleared within three working days, but with advanced technology, computerisation and the internet, banks have managed to double that to six.

In fact, the matter is more complicated than that; in fact, it’s a lot more complicated than that.

Under rules introduced in November 2007, cheques paid into an interest bearing account will start to earn interest after no more than two days and customers can withdraw cash from current accounts a maximum of four days after paying in a cheque.

But then there’s another rule which says that cheques will clear with absolute certainty after six days, unless fraud is suspected. This means, presumably, that you could pay a cheque for £100 into your bank account, withdraw £100 four days later and spend it, but then have the cheque bounce on you two days after that and have to repay your bank.

Apparently, prior to 2007 it was even worse. Then cheques could be rejected by a bank at any time, if fraud came to light later – even months later – and it did not matter if the person paying in the money had, acting in good faith, withdrawn the money and spent it.

It might be argued that this doesn’t matter as cheques become increasingly rare, with many retailers now refusing to accept them.

But the brave new world of electronic transfers is little better. It seems that a year after the launch of same-day bank transfers nearly half of payments take three or more days.

An investigation by BBC Radio 4’s Money Box programme reveals that this equates to around £45bn-worth of transfers since the amusingly termed Faster Payments System began in May 2008. With banks, it seems, we just can’t win.

Peter Jackson is a writer and ex-business editor of The Journal – p.jackson77@btinternet.com