UK banking customers are set to benefit from a number of new banking changes announced by APACS as part of the sweeping reforms of the UK banking industry.
Following an investigation by The Office of Fair Trading, changes to the cheque clearing process, which come into effect from Friday November 30, will help provide greater transparency to customers when paying a cheque, banker’s draft or building society cheque into their accounts
The hope is that the shake-up which applies to all major banks and building societies in the UK, will offer customers the certainty that at the end of the six working days, their money will have safely cleared and if there are any subsequent losses, they are fully protected.
Under the current system, it can take four days for transfers to reach their destination with banks and building societies creaming off an estimated £25m a year in interest during the transfer time.
However, contrary to popular belief, a cheque can still bounce weeks after it should have cleared, giving fraudsters time to cover their tracks and disappear. With the new rules, banks must now protect customers if this happens.
Now under the new system, customers can earn interest or start counting against an overdraft within two working days of a cheque being paid into their account and the maximum timescales for the day when money can be withdrawn is now no later than four working days after paying in a cheque.
Consumer groups have welcomed the move despite the declining popularity of cheques. Just over 4.9 million cheques were issued last year, compared to 11 million in 1990 which has been recorded as the peak year for cheque volumes. Despite this, small businesses regularly use cheques for certain payments and have found the slow and archaic UK cheque system increasingly frustrating.
However, banks and building societies can further improve their timescales should they wish to in order to attract new customers.
The news comes after a study by the Cheque and Credit Clearing Company found that less than a quarter of cheque users knew the correct timescales for cheque clearing, and more than half were worried about accepting cheques for fear they may bounce.
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."
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© Fair Investment Company Ltd