Money Grouse: Caught out by cheque-clearing

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The Independent Online
PETER HURRELL paid four cheques for a total of pounds 3,750 from his bank account into his Nationwide Building Society BonusBuilder account on 11 December.

He was told by the building society that he could not withdraw money against the cheques until seven working days later.

Yet the money was paid out of his bank account after four days.

'I believe this is a racket that ought to be exposed,' Mr Hurrell said, arguing that Nationwide must be making money on the funds even though it does not let savers have access to them.

Nationwide confirmed that customers could not draw on cheques from savings accounts until seven working days after the money was paid in, but seemed confused about the reason.

At first, a spokesman said it took up to seven days for the society to receive confirmation through the cheque-clearing system about whether a cheque had been honoured.

So, in allowing people to draw funds from an account after only three days the society would be 'accepting an element of risk'.

The Banking Information Service and the Association of Payment Clearing Services (Apacs) were mystified by Nationwide's understanding of the clearing system. Apacs oversees the cheque-clearing service and Nationwide is a full member of the service.

Not all building societies are members and they must set up an arrangement with a bank to clear their cheques. This will add to the clearing cycle at these societies.

But Apacs said that an institution like Nationwide should have received notification about whether a cheque had cleared by midday on the fourth working day after it had been paid into an account. So if a cheque is paid in on a Monday, the society should know by Thursday lunchtime whether it had bounced.

However, Apacs also said that many banks and building societies gave themselves a couple of days' grace, prohibiting customers from drawing on cheques for five days or more to allow for postal and other delays.

Barclays customers can draw on cheques paid into their own branch on the fifth day. Cheques paid into other branches can be drawn on after six days.

Back at Nationwide, Dennis Brockwell, the divisional director of banking and savings, agreed that Nationwide could clear cheques within four days.

The problem, he argued, was that some cheques came in through agencies - Nationwide has 200 of these - or cash machines, and these cheques might not start moving through the clearing system until one or two days after they left a customer's hands. Therefore, it could indeed be more than four days before Nationwide knew whether the cheque was a good one.

He pointed out that the society paid interest from midnight on the third day after the customer deposits the cheque.

Mr Brockwell agreed Nationwide started making money on cleared cheques after three days but said this was a legitimate profit margin. Normally people did not want to draw on deposits into savings accounts after only three days anyway.

Cheques for under pounds 1,500, paid into FlexAccount current accounts, can be drawn on after three days.

Halifax Building Society's rules do not vary greatly from Nationwide's though it is not a member of the clearing system. Halifax allows customers to draw on cheques deposited in Maxim current accounts after five days and on savings accounts after seven.

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