Time’s up for banks on cheque clearing rip-off

THE time banks take to clear a cheque is at last to become the subject of a major investigation.

Delays in the processing system mean most cheques take four days to clear. Some take up to a week.

This comes at a cost to customers who often become overdrawn when money is not credited to their accounts as fast as it could be.

Meanwhile, the banks profit by charging customers penalties, usually about £ 25, when an account is overdrawn or a cheque bounces.

The Office of Fair Trading yesterday announced that a taskforce will investigate the system. It wants clearing times speeded up.

Consumer groups believe action is overdue. Ed Mayo, chief executive of the National Consumer Council, said: ‘ A donkey could deliver cheques faster than banks can put money into customers’ accounts.

‘There are 6.5million cheques issued every working day, so the system needs to work speedily for everyone.’

The problem was identified by a Treasury inquiry in 2000. But the OFT has allowed the banking industry to delay improvements.

Its taskforce is to publish proposals for improvements next summer. However, it could be 2008 before changes are made.

‘Consumers’ patience is fast running out and could be totally exhausted by the time these plans come to fruition,’ added Mr Mayo.

Eddy Weatherill, founder of the consumer pressure group the Independent Banking Advisory Service, said: ‘ The way the banks have twisted and turned on this issue is a scandal. They have delayed all attempts to speed up cheque processing.

‘There is absolutely no justification for the delays.

‘This is just another example of pure greed by the banks.

‘ They make money by slowing processing and clearing, so it is not in their interest to do anything about it.’

The Forum of Private Business claims UK banks are bottom of the European league on speed of processing.

Halifax takes up to four working days to credit cheques to its current accounts and seven working days into savings accounts.

It is typically four days at RBS- NatWest, Lloyds- TSB and HSBC before funds can be withdrawn.

Barclays takes five days, but allows customers to draw up to £1,000 against the value of the cheque when it is paid in.

The Association for Payment Clearing Services represents the banks on cheque clearing.

Communications chief Sandra Quinn said customers can play the system to benefit from delays in clearing cheques.

Writing a cheque rather than making an electronic payment means money stays in the account longer, earning interest for the customer.

‘ We have to research very carefully who would lose and benefit from speedier cheque processing,’ she said.