David Prosser: Banks still slacking on cash transfers

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The Independent Online

Just one cheer for the deal agreed by British banks this week to speed up electronic money transfers. It is obviously good news that the banks have finally worked out how to move cash around at the touch of a button. But the Office of Fair Trading (OFT) should not have given them until the end of 2007 to get the new system up and running.

Only then will customers be sure that when they pay a bill online or by phone, or transfer cash to another account, that the money will move instantaneously. Currently, it takes three days before the funds are available to whomever you are paying.

The banks say only a relatively small amount of business is affected, because direct debits, the most common type of electronic transfer, already take place instantly. But if they can make this type of payment work perfectly well, customers should not have to wait another 18 months for the rest of the system to work properly.

The OFT has also failed to tackle the outrageous amount of time banks still take to clear paper cheques. Although this still takes a ridiculous five working days in many cases, the OFT apparently wants to investigate further before telling the banks to put their house in order.

Bankers argue that cheque-clearing takes longer because there is an actual bit of paper that must be transported from one branch to another. But how this can take five days is beyond me. Is there some poor overworked bank clerk who spends his days walking from branch to branch delivering cheques?

It isn't just for the sake of convenience that the cheque-clearing system must be overhauled. Delay also makes it easier for fraudsters to operate.

Most account holders understandably think that once their bank tells them a cheque has cleared, the money is safe. But that's not the case - only when your bank has received hard cash from the account holder who wrote you the cheque is the money legally yours. In other words, your bank is within its rights to say a cheque has cleared and then take back the cash later. And there are no rules to say how long you must wait to be sure there are no problems.

Conmen have been exploiting this trap, particularly with secondhand cars and through auction sites such as eBay. They write you a cheque, but tell you to wait until it has cleared to release whatever you're selling. Your bank clears the cheque, so you hand over the goods, only to find out later you have been stung.

Banks can't be bothered to improve cheque-clearing systems, because these are more expensive to run. They want to move everyone on to electronic banking. The OFT must not help them achieve this goal.


If you're a homeowner planning to make a killing on sporting events such as Wimbledon or the British Open Golf tournament, be careful not to let the Inland Revenue spoil your summer.

Property owners who live near to locations such as Wimbledon and St Andrews have for years been making a fortune by letting out their homes for a few weeks. But the Inland Revenue says that this year it plans to target people who rent out their homes temporarily, whether it is to holidaymakers or for very short-term lets linked to a particular event.

Unless you declare this rental income on your tax return next April, you could be in hot water.


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