Cheque Clearing and the Re-presenting of cheques

[L3ON]

Hi

Im not sure if this is correct place to post this and I cant find the correct forum since the website upgrade! I'll be brief and wont object if someone moves my post to the correct place!

I have done a DSAR and noticed on my Bank Statement in 2007 that a cheque I wrote was presented on Tuesday 02/01/2007 and it bounced. It was further presented on the Friday 05/01/2007 and bounced again.

02/01/2007 Tuesday
05/01/2007 Friday

If cheque clearing took 4-5 days at that time, how could it be possible that a cheque could be represented 3 days after bouncing in the first place. I am mystified!

Please can anybody shed any light on this.

thank you

[des8]

Not difficult, returning a cheque unpaid takes 24 hours. Nothing to do with clearing, other than the fact the cheque was not cleared.
The paying bank (yours) returns the cheque marked "refer to Drawer" to the presenting bank on 02/01/2017.
Presenting bank receives uncleared cheque on 03/01/2017 and represents it on 04/01/2017.
Paying bank receives cheque on 05/01./2017 and returns cheque unpaid once again!

The current paper based clearing system is often referred to as 2-4-6.
On day 2 after the cheque has been paid into the depositors bank the paying bank decides whether or not to honour the cheque.

[L3ON]

Thanks DES8.

Was this the case in 2007? I can understand a cheque might come back if marked 'Refer to Drawer Please Represent', but would it come back if marked just 'Refer to Drawer' and would my bank have to accept a cheque marked as such?

Also, if the cheque has been returned, then would that same cheque not need to go through clearing to be re-presented on the second occasion? Otherwise why bother with clearing in the first place?

Sorry, just trying to get this clear in my head.

[des8]

Current paper based clearing system (due to be phased out later this year) started Nov 2007!
That system put in place the maximum times for the stages in clearing so that customers would have clarity and certainty.
Prior to then the system had no certainty of maximum times and clearing (ie the process of the depositors bank sending the cheque to the paying bank who then authorise payment) could and often was within the four day cycle to which you referred. (It was often slower as well!!)

If a cheque is represented, no matter how marked, the paying bank must deal with it. If they either honour it or they return it unpaid. They cannot "not accept" it and just return it undealt with.

[L3ON]

Thanks DES8. The key question for me is if the cheque has been returned, then would that same cheque not need to go through clearing to be re-presented on the second occasion or is there some inter-bank process that the banks use at this point?

[des8]

Prior to 2007 your timescale is not impossible.It could even have been processed quicker:

MR A gives MR B a cheque drawn on XYZ Bank.
MR B deposits cheque into his account with LMN Bank on 02/01
LMN Bank pass cheque to XYZ Bank evening 02/01
XYZ Bank decline to honour cheque 03/01, mark Mr A's account and return cheque to LMN Bank evening 03/01
LMN Bank advise Mr B 04/01,
Mr B instructs LMN Bank to represent cheque
LMN Bank pass cheque to XYZ Bank evening 04/01
XYZ Bank decline to honour cheque again 05/01, mark MR A's account and return cheque to LMN Bank evening 05/01

[L3ON]

Hi DES8. Thanks again for stepping up and contributing to my issue. Your example seems to show cheques being passed directly between
banks and my understanding is that even in 2007 all cheques needed to go through a Clearing process.

The below is from Ombudsman's News January 2004

http://www.financial-ombudsman.org.uk/publications/ombudsman-news/34/cheque-paid-34.htm

Day 1 Mr X goes into a branch of bank B (where he has his account) and pays in a cheque. The cheque was drawn on a branch of bank A. At the end
of that day, bank B puts the cheque in the clearing system.

Day 2 the cheque arrives at the central clearing system's "exchange house". It is collated with other cheques drawn on bank A and they are all
sent off to bank A at the end of the day.

Day 3 the cheque arrives at bank A and is normally then paid. But if there isn't enough money in the account, it may bounce. In this example,
we will assume that is what has happened to the cheque Mr X paid in. So bank A sends the cheque back to bank B by first-class post.

Day 4 if the post is prompt, the cheque arrives. Bank B then writes to Mr X to tell him the cheque has bounced. (The decision to bounce a cheque
can be delayed, in certain circumstances, until the following morning. For high value cheques, the "bouncing" bank - in this example, bank A - will
phone the other bank. Otherwise, it may be necessary to add a day.)

Day 5 if the post is prompt, Mr X gets the bank's letter. This is normally the first indication the customer has that there is a problem
with a cheque.

Weekends and bank holidays do not count in the overall timescale and there can be an extra day's delay if - for example - one of the banks is in England and the other is in Scotland (because of different clearing practices). Further delays can arise if the customer's account is, say, with a small bank or building society that uses another bank to process its cheques.

My query is whether the cheque that bounced needs to go through the clearing system again, as outlined above.

If I cannot clarify this on this forum I intend to ask the bank directly before I launch my complaint. Apologies for pressing the point!

[des8]

I was relaying what my brother (retired banker) told me about his early days in banking, when banks local to each other did their own clearing.
At the end of the day, clerks of respective banks would meet in a local cafe to deal with the credits and debits.
Obviously if items had come from banks elsewhere the cheque would be sent by first class mail etc.
You did not say if the banks were local to each other, just if it was possible for cheques to be marked on account as bounced out twice in a four day cycle.
to which the answer is yes.

And also you have not taken into account the fact that the depositor might have asked for special clearance!

And no need for apologies, we enjoy debates