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Banks agree faster cheque clearance. By Dan Martin

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14th Nov 2006
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Bank customers will be allowed to withdraw cash from accounts within four days of paying in a cheque and will receive interest after two days under new regulations introduced by the government.

After a two-year long review into the time it takes banks to deal with cheques, the regulations have been agreed by the banking industry and the Office of Fair Trading (OFT).

From November 2007, all consumers and businesses will be able to withdraw funds deposited by cheque into current and basic bank accounts no later than four working days after the cheque is deposited, while deposits will begin to earn interest or count against overdrafts within a maximum of two working days.

In addition the Payment Systems Task Force, set up by the government to investigate the banking system, will be replaced by the Payments Industry Association to self-regulate the sector.

Economic secretary Ed Balls said: "Today's announcements are good news for consumers and small businesses who will benefit from faster electronic payments, and more certainty and greater transparency when making cheque payments and good news for the payment systems industry which has worked hard to develop an innovative model of self-governance in line with the government's better regulation agenda."

Critics of the current banking system have accused it of being archaic and slow, with many calling for the OFT to crack down on the time it takes to cheques to move between bank accounts. However, the watchdog backed down from forcing banks to speed up the transfer process after concluding that there is "no case for a complete rebuild of the cheque clearing system". It said cheques have seen a rapid decline in use over recent years, with many major retailers trialling other payment methods or stopping accepting cheques altogether.

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By mickeyparish
20th Nov 2006 16:12

Faster clearance ???
I believe the Swedish government, under similar circumstances some years ago, gave their banks an ultimatum : instant credit of cheques or else !

hey presto ! cheques paid in to a bank in Sweden are credited immediately provided funds are available in the payer's account.

What use are our qangos and ministries ?

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By AnonymousUser
15th Nov 2006 15:10

4 days?!
I thought the standard time for a cheque to clear was already 4 days. Why does it take so long? Along with the announcement from First Direct today (incidentally the press knew before their own customers by the sounds of it) to start charging their customers £10 per month if they don't pay in over £1,500, this is just adding to my annoyance at banking practices. Argh!

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By andymeeson
15th Nov 2006 11:35

Tail wagging dog?
"the watchdog ... conclud[ed] that there is "no case for a complete rebuild of the cheque clearing system". It said cheques have seen a rapid decline in use over recent years"

Might it not be the case that cheques are in decline precisely because the clearing system is so useless? The OFT is missing the point: reform the clearing system and people will start using cheques again.

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By User deleted
14th Nov 2006 16:42

4 days?
Four days is quite some time to clear a cheque. I know they have to check that funds are available, but in an electronic age 4 days is painfully slow, and I'm already on a better deal than that. Barclays allow you to withdraw up to £1k on a cheque as you pay it in. If it bounces, then you get charged the relevant fees. Otherwise there's no issue.

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