Business leaders hit out over cheque clearing
Banks are failing to clear business cheques within three days, claims FSB
The Federation of Small Businesses (FSB) has launched a blistering on the banking industry over ‘secret’ cheque clearing procedures. Traditionally, banks claim to clear cheques – in other words establish that the payer has adequate funds to make the payment – within about three working days.
But the FSB says it has uncovered evidence suggesting that the process can take many times longer, and that banks have withdrawn ‘cleared’ cheques several months after they have been approved.
The finding has worrying implications for small firms, many of which receive payments by cheque. It means that money can be withdrawn from corporate accounts without warning, if cheques finally ‘bounce’.
Industry experts say the clause is not a recent development, but that information on it is hidden in the small print of banking agreements.
FSB member Ian Roberts says his bank, NatWest, guaranteed that funds would not be withdrawn from his account later than 10 working days after the cheque was paid in, but have recently changed their minds.
Roberts, who runs a rare books shop, said: “Over the summer something changed. NatWest started to say that they could withdraw a cheque at any time. This leaves me in an impossible situation.
“I deal in high value antique books and need to know that I have been paid before they are dispatched. I cannot operate without that certainty and I am sure that the same applies to the four million other businesses in this country.”
According the FSB, the banking industry has even admitted that cheques are not a safe way of transferring funds and is urging businesses to consider alternatives.
Experts suggest that a safer alternative might be automated internet or phone payments from an individual or business. These are generally free if the payer’s account is in credit.