Bank's liability

[Grobag]

Customer's cheque banked at our branch 11/1. Letter from our bank received
today 20/1 (dated 19/1) enclosing 'stopped' cheque.
So that's 9 days before we are informed -- unrealistic when we assume the
customer is waiting for their goods.

Couple of questions -

1. How long is it advisable to wait before despatching goods against banked
cheques?

2. Is there a time limit after which the bank could be considered negligent
and be required to compensate us for unpaid despatched goods?


Thanks

 

[usenet]

1. How long is it advisable to wait before despatching goods against banked
cheques?

While admittedly not directly relevant to the current thread, looking
at this the other way can the customer not equally say:-

How long is it advisable to wait before sending the check after
receiving the goods (to check they work alright maybe?)?


I never quite understand the logic of sellers in private deals who
feel that it's reasonable to wait for a cheque to 'clear' before
sending goods. The buyer is at similar risk so the 'fairest' way to
act always seems to me for both ends to send cheque/goods at the same
time. OK, receipt of cheque isn't a guarantee of payment but the
cheque will probably arrive quicker (letter v. parcel) so that just
about cancels out.

 

[Grobag]

| >
| > 1. How long is it advisable to wait before despatching goods against
banked
| > cheques?
| >
| While admittedly not directly relevant to the current thread, looking
| at this the other way can the customer not equally say:-
|
| How long is it advisable to wait before sending the check after
| receiving the goods (to check they work alright maybe?)?
|
|
| I never quite understand the logic of sellers in private deals who
| feel that it's reasonable to wait for a cheque to 'clear' before
| sending goods. The buyer is at similar risk so the 'fairest' way to
| act always seems to me for both ends to send cheque/goods at the same
| time. OK, receipt of cheque isn't a guarantee of payment but the
| cheque will probably arrive quicker (letter v. parcel) so that just
| about cancels out.
|
| --
| Chris Green
|


What are you, brain dead?

This customer attempted to commit fraud by exploiting the known delays in
the banking system that I have described in my OP.

Anyone have a sensible answer to this problem?

Grobag
--

 

[Ronald Raygun]

Chris Green wrote
| While admittedly not directly relevant to the current thread, looking
| at this the other way can the customer not equally say:-
|
| How long is it advisable to wait before sending the check after
| receiving the goods (to check they work alright maybe?)?
|
| I never quite understand the logic of sellers in private deals who
| feel that it's reasonable to wait for a cheque to 'clear' before
| sending goods. The buyer is at similar risk so the 'fairest' way to
| act always seems to me for both ends to send cheque/goods at the same
| time. OK, receipt of cheque isn't a guarantee of payment but the
| cheque will probably arrive quicker (letter v. parcel) so that just
| about cancels out.

What are you, brain dead?

That's uncalled for.

This customer attempted to commit fraud by exploiting the known delays in
the banking system that I have described in my OP.

Chris has made the valid point that, generally, although the seller is
at risk of the buyer's cheque bouncing, the buyer is also at risk of
a seller fraudulently either sending junk which doesn't work, or indeed
of not sending anything at all.

Anyone have a sensible answer to this problem?

Use paypal :-((

Ask the collecting bank (yours) to contact the drawee (that's the buyer's
bank) to enquire whether the cheque "is paid". If they say yes, it
cannot bounce.

Or don't take cheques. Ask your customers to send the money directly
to your account, e.g. by online banking.

But bear in mind that this sends a signal to your customers that you
don't trust them, which will, in turn, set them wondering why the hell
they should trust you. That's where Chris came in.

 

[Tumbleweed]

Or don't take cheques. Ask your customers to send the money directly
to your account, e.g. by online banking.

But bear in mind that this sends a signal to your customers that you
don't trust them, which will, in turn, set them wondering why the hell
they should trust you. That's where Chris came in.

Lots of organisations are now stopping accepting cheques. And no doubt there
will be a vicious circle as the fraudulently inclined find their range of
targets narrows and so the proportion of fraudulent cheques increases.

 

[Scott2k5]

Customer's cheque banked at our branch 11/1. Letter from our bank received
today 20/1 (dated 19/1) enclosing 'stopped' cheque.
So that's 9 days before we are informed -- unrealistic when we assume the
customer is waiting for their goods.

Couple of questions -

1. How long is it advisable to wait before despatching goods against
banked
cheques?

i asked our account manager this same question ages ago. he said 6 working
days should cover it.

but clearly not in this case.

apparently, there are unnecessary delays such as the unpaid cheque being
posted back to your bank, then posted on to you.

9 days is a bit extreme though. maybe your account manager could throw some
light on this

2. Is there a time limit after which the bank could be considered
negligent
and be required to compensate us for unpaid despatched goods?

you don't stand a chance. your bank will just blame some anonymous
processing centre then point you to a ream of terms and conditions which you
have signed up to indemnifying them for everything.

are these business-to-business transactions? has an explanation been given
by the person owing you money?

it looks a bit bleak when the cheque is stopped, however. RDPR cheques still
have a chance of going through.......

 

[Ronald Raygun]

i asked our account manager this same question ages ago. he said 6 working
days should cover it.

but clearly not in this case.

Not so clear. Middle of 11th plus 6 working days gets you to
middle of 19th. That's when the bank posted the letter.

Still, 6 working days is outrageously long. The clearing cycle
is much shorter than that, isn't it?

it looks a bit bleak when the cheque is stopped, however. RDPR cheques
still have a chance of going through.......

The OP has the guy's address (since he posted goods to him) and he
has the cheque. He should write one "last chance" letter to the guy
and if satisfaction is not immediately forthcoming, go straight to
court (Small Claims). Sue on the cheque, and a win is guaranteed,
because stopping a cheque is illegal.

Actually, it might be better not to bother with Small Claims, and
use the full slow-track procedure and hire an expensive lawyer to
deal with it, whose costs will be added to the claim, to teach the
bastard a lesson.

 

[john boyle]

Customer's cheque banked at our branch 11/1. Letter from our bank received
today 20/1 (dated 19/1) enclosing 'stopped' cheque.
So that's 9 days before we are informed -- unrealistic when we assume the
customer is waiting for their goods.

Hmm that is a couple of days too long.

Couple of questions -

1. How long is it advisable to wait before despatching goods against banked
cheques?

I would wait 7 working days if you paid it in at your account holding
branch and 9 if you paid it in elsewhere. The safest way is to get you
bank to ring the drawee and ask if the cheques has been 'paid'. DO Not
ask them if the chequer has 'cleared' as you will get a misleading
answer.

2. Is there a time limit after which the bank could be considered negligent
and be required to compensate us for unpaid despatched goods?

Yes, the drawee should only bounce the cheque on the day it is presented
or the next day (exceptionally). If they bounced it outside of those
limits then I would say you could sue them.

The delay could have been caused by other things, such as you paying it
in after 3.30pm (this may cause a days delay). The cheque was bounced on
the day after presentation (which adds a day) the cheque is posted by
the drawee to the collecting bank first class, this could take a few
days. It then has to be posted to you, but it seems that was delivered
the next day. If you paid it in at a branch other than your own branch
then it has then to be posted to them before it is posted to you,
possibly adding two days.

 

[john boyle]

stopping a cheque is illegal.

Is it? Since when? Have I had a senior moment and missed something?

 

[Ronald Raygun]

Is it? Since when? Have I had a senior moment and missed something?

You know what I mean. Stopping a cheque is OK if the cheque is
lost or stolen and if a suitable alternative arrangement has been
made with the payee (such as issuing a replacement cheque, or such
as having agreed after the cheque has been given to the payee that
you wanted to alter the amount, and so rather than write another
cheque for the difference, which would mean he had to pay in two
cheques (perhaps incurring an extra fee), that he should simply
tear up the original and you would get another for the revised
amount to him - in this case it's safer to stop the "torn up"
cheque in case the payee "forgets" to tear it up, and finds it
languishing in his wallet weeks later and "thinks" he's still
due it).

But stopping a cheque which has been given, and been accepted in good
faith as equivalent to cash, is illegal. That's a suitably woolly
term which avoids saying whether I actually mean a mere tort or the
full criminal monty. That it is at least the former is something
you do not dispute, is it? And that it can be the latter (i.e. fraud)
in some circumstances, such as if there is already in the writer's mind
the intention to stop it at the moment he is writing it, you wouldn't
either, would you?

 

[Grobag]

OK thanks for all the comments guys. From some of the responses it looks
like people thought we were selling an item on eBay. Not so, we are running
a business here, and our product sells for over £100. We take credit/debit
cards but some customers prefer to pay by cheque. With all the 'distance
selling' and internet commerce these days there are numerous fraudsters
trying it on out there, and we ourselves have been done once or twice.
However we do like to keep it to a minimum!

Occasionally a ccd payer will deny placing the order, and the card company
always gives them the benefit of doubt if it was a phone order (i.e. no
signature). To minimise this we now, as do many firms, only despatch goods
to the cardholder address.

As I said before, stopping the cheque, or writing one with insufficient
funds, or on a closed a/c, with the intention of relying on the known delays
in the banking notification system to acquire the goods for free, is of
course an old and well known con trick. The purpose of my OP was to ask for
advice on defeating this, without keeping the customer waiting an
unreasonable time for his goods.

I would not want to rely on a verbal statement on the phone from a bank as
was suggested. Oh well, just have to wait 2 weeks before despatching against
a cheque in future.

Grobag :-(
-

 

[Scott2k5]

Not so clear. Middle of 11th plus 6 working days gets you to
middle of 19th. That's when the bank posted the letter.

Still, 6 working days is outrageously long. The clearing cycle
is much shorter than that, isn't it?

i think it is something like:-
day 0 - pay cheque in
day 3 - paying bank have until midday to decide not to pay cheque
unpaid cheque then posted (!) back to your bank
day 4 - your bank receives if first class post works (!)
your bank posts it to you with letter confirming bad news
day 5 - you receive bounced cheque

So, if the first class post is late on 2 occasions, 7 working days can
elapse.

it is an awful system. i look forward to the day when cheques are scrapped

 

[Scott2k5]

slightly unrelated but i understand that a dishonoured cheque in India will
result in the signatory being arrested and held in prison until the payee
has been paid.

sounds like a good system.

a similar thing happens in sound middle-eastern countries if your business
goes bust. you can be held in jail until any debts have been satisfied. so
no chance of skipping the country leaving your creditors high and dry

 

[Ronald Raygun]

slightly unrelated but i understand that a dishonoured cheque in India
will result in the signatory being arrested and held in prison until the
payee has been paid.

You don't need to go all the way to India. Word on the street is that
France is pretty tough on this sort of thing too.

 

[Ronald Raygun]

i think it is something like:-
day 0 - pay cheque in
day 3 - paying bank have until midday to decide not to pay cheque
unpaid cheque then posted (!) back to your bank
day 4 - your bank receives if first class post works (!)
your bank posts it to you with letter confirming bad news
day 5 - you receive bounced cheque

So, if the first class post is late on 2 occasions, 7 working days can
elapse.

it is an awful system. i look forward to the day when cheques are scrapped

It's utterly arcane to involve the postal system in the cycle.
Interbank communication should be electronic. Since cheques
are mostly OCRed in the branch where they are paid in, even
allowing for the whole day's business to be batched up (as
opposed to each cheque being processed all the way to the drawee
instantly) we have the technology to shorten the whole cycle to
next morning. And customers who are victims of bounced cheques
should be given the option of being notified quicker than by post
too.

But just because the clearing system is deficient, don't blame cheques.
They have their good points, though I think we probably should expect
to see increased use of direct account-to-account transfers.

 

[john boyle]

john boyle wrote:

But stopping a cheque which has been given, and been accepted in good
faith as equivalent to cash, is illegal.

No its not. Which law is that then?

That's a suitably woolly
term which avoids saying whether I actually mean a mere tort or the
full criminal monty.
Ahh!

That it is at least the former is something
you do not dispute, is it?



And that it can be the latter (i.e. fraud)
in some circumstances, such as if there is already in the writer's mind
the intention to stop it at the moment he is writing it, you wouldn't
either, would you?

That would certainly be illegal.

 

[john boyle]

Scott2k5 wrote:

It's utterly arcane to involve the postal system in the cycle.
Interbank communication should be electronic. Since cheques
are mostly OCRed in the branch where they are paid in,

I dont think are OCR just yet, I believe the old manually encoded system
which puts the amount at the end of the row of magnetic characters at
the bottom of the cheque is still the system..

even
allowing for the whole day's business to be batched up (as
opposed to each cheque being processed all the way to the drawee
instantly) we have the technology to shorten the whole cycle to
next morning. And customers who are victims of bounced cheques
should be given the option of being notified quicker than by post
too.

Truncation has been available for years and years but there is a huge
inertia in the banking system BUT the plans are now approved by all and
I think you will see big changes soon.

 

[john boyle]

I would not want to rely on a verbal statement on the phone from a bank as
was suggested.

Thats up to you, but it is a formal bank procedure used extensively by
banks themselves when deciding whether to payout against uncleared
effects. The collecting bank asks the drawee if the cheque is paid by
phone. Both parties record the details of the conversion in a register,
If the cheque is physically present at the drawee (which may not be the
case) the cheque will be stamped paid and the details of the phone call
recorded on it. The collecting bank obtains the name of the clerk at the
drawee and records that. If the cheque is subsequently returned unpaid
the collecting bank will refuse to accept the unpaid item and would
return it to the drawee without debiting your account

Oh well, just have to wait 2 weeks before despatching against
a cheque in future.

Try the above procedure, it works.

 

[Tim]

The collecting bank asks the drawee if the cheque is paid by
phone. Both parties record the details of the conversion in a register,
If the cheque is physically present at the drawee (which may not be the
case) the cheque will be stamped paid and the details of the phone call
recorded on it. The collecting bank obtains the name of the clerk at the
drawee and records that. If the cheque is subsequently returned unpaid
the collecting bank will refuse to accept the unpaid item and would
return it to the drawee without debiting your account

The problem is, how does the customer know that
the bank has *actually* gone through that procedure?

The person on the phone at the collecting bank might be
one of those untrained clerks that doesn't know what
they are doing, and so doesn't apply the above procedure
properly, and so the cheque is not "paid" after all -
even though the untrained clerk comes back and says:
"yep, that cheque is now paid sir. Have a nice day!"

What can the customer do in that situation -
especially if the clerk subsequently denies having
said "paid", and says that they only said "cleared"?!

 

[john boyle]

The problem is, how does the customer know that
the bank has *actually* gone through that procedure?

The person on the phone at the collecting bank might be
one of those untrained clerks that doesn't know what
they are doing, and so doesn't apply the above procedure
properly, and so the cheque is not "paid" after all -
even though the untrained clerk comes back and says:
"yep, that cheque is now paid sir. Have a nice day!"

True, and the letter sent by the bank as an alternative to the above
(suggested recently) could have prepared on a word processor using
stolen bank stationery with a forged signature

What can the customer do in that situation -
especially if the clerk subsequently denies having
said "paid", and says that they only said "cleared"?!

He he!