Can the bank ‘UNCLEAR’ cleared funds?

[Nicola Bell]

hello,
I'm new to the forum. I read about one of the successful court cases in the paper and thought I'd take a look at your site.
I do have an issue relating to the 6 days and cheque clearing timescales but I'll come back to that after I've had a little look at what you've already go going on,
thanks for letting me in!
best wishes,
Nicola

[Nicola Bell]

Re: Hello Lovely People!

hello,
I've had a quick look but doesn't seem like anyone has the same issue as me.
My issue is that I took funds from a cheque that had cleared in my account. The cheque bounced - both the bank and I knew that it would when they cleared the cheque but they cleared it anyway as the 6 days were up and a replacement cheque was on its way. However, the replacement cheque bounced too and they then wanted the money back from the first cheque and so helped themselves to it from my account leaving me overdrawn. Am I entitled to keep the funds, (which would be a windfall for me) as the cheque was cleared and the money was legally mine? If yes, then how can I enforce this? Any thoughts?????

[des8]

Re: Hello Lovely People!

Hi and welcome.
For most Banks if a cheque is returned by the paying bank after the close of business on the sixth day after paying in, they cannot debit your account without your permission unless you were involved in fraudulent activity over it.
Which bank is involved?

[des8]

Re: Hello Lovely People!

Further to my post above here is a quote from the Cheque and Credit company website.
They are the guys responsible for the clearing system.

"There is often confusion about how the clearing system
works and the time it takes for a cheque to clear. In
November 2007, changes were introduced to increase
clarity and certainty for all elements of the UK sterling
cheque clearing process. These changes apply to
customers paying in UK sterling cheques paid into
sterling accounts with UK banks and building societies.
These are sometimes referred to as the 2-4-6 and 2-6-6
cheque clearing timescales.
The 2-4-6 timescales have been implemented for UK
sterling current and basic bank accounts whilst the 2-6-6
timescales have been implemented for UK sterling savings
accounts. For customers it means that for the first time after
paying in such cheques they can be sure at the end of six
working days that the money is theirs. After this point, the
customer is protected from loss if the cheque subsequently
bounces, and the money cannot be reclaimed without
their consent unless they are a knowing party to fraud.
These timescales are maximum timescales for when
customers will start earning interest on the money paid
into their accounts and when it will be available for
withdrawal. Individual banks may compete on when
they will pay interest or allow funds from the cheque
paid in to be withdrawn, so customers should make sure
they have an account best suited to their needs.
Customers may deposit (i.e. pay in) a cheque in to their
account by a variety of means: at a branch counter; at
some banks through a cash machine or other accepting
machine; at a post office; or by post. Every bank will make
clear to the customer the day when:
• The cheque is considered to have been deposited.
• Interest is paid on cheque funds.
• Withdrawal is allowed.
• They can have certainty that the cheque will not
be returned unpaid."

Here's the website:http://www.chequeandcredit.co.uk/fil...facts_2012.pdf

[Nicola Bell]

Re: Hello Lovely People!

hello des8,
thanks so much for this response. Although my bank's terms and conditions say clearly that the 6 days start when the cheque is 'deposited' at the Post office, it did not show on my account until 8 days later. The bank entered it as immediately cleared funds and let me take the money out, but the bank has just removed the money from my account. I took the issue to the ombudsman but he felt that the bank had made an error and could not be responsible for the cheque until it hit my account. I'm thinking of taking it to a small claims court but there seems to be no legal precedent and I would expect a judge to be more on the side of the bank. This money would be a windfall, I haven't lost the money in the cheque, but I think that the bank expects people to bear the financial consequences of their mistakes, so why shouldn't the bank when it makes mistakes. :reindeer:

[des8]

Re: Hello Lovely People!

Presumably you have a receipt showing date of deposit and under the "certainty of fate" rule I would have anticipated the banks honouring their "mistake".
However you mention that you and the bank (which bank, yours or the drawer's?) knew the cheque would bounce when it was presented for payment.
I'm not clear why you would present a cheque which you knew would be dishonoured (potentially an attempted fraud) and if your bank was aware that you knew the cheque would be returned unpaid, (although it was credited to your account), they would not allow you to draw against those funds.
I'm not surprised at their action.If you were aware that the cheque would be dishonoured you would not be allowed to profit from the bank's mistake.
One cannot knowingly take advantage of another's error, it is illegal! cf Rhind v commercial bank of Scotland (1860)
I suspect you would gain nothing by making a court claim.

[Nicola Bell]

Re: Hello Lovely People!

Presumably you have a receipt showing date of deposit and under the "certainty of fate" rule I would have anticipated the banks honouring their "mistake".
However you mention that you and the bank (which bank, yours or the drawer's?) knew the cheque would bounce when it was presented for payment.
I'm not clear why you would present a cheque which you knew would be dishonoured (potentially an attempted fraud) and if your bank was aware that you knew the cheque would be returned unpaid, (although it was credited to your account), they would not allow you to draw against those funds.
I'm not surprised at their action.If you were aware that the cheque would be dishonoured you would not be allowed to profit from the bank's mistake.
One cannot knowingly take advantage of another's error, it is illegal! cf Rhind v commercial bank of Scotland (1860)
I suspect you would gain nothing by making a court claim.

Hello,

I can see how this might look but I didn't present a cheque that would bounce. I will look up the reference you have given but in the meantime I'd like to give some detail to show I'm not a fraudster. The cheque was fine, I paid it in on the 5th Dec 2012 and by 13th December it was still not showing on my account, I rang the bank but they were really unhelpful and unable to tell me what had happened to it. They refused to check their suspense account and told me lots of nonsense. They suggested I got the cheque cancelled, which I did. I told them it was cancelled and I got a replacement cheque, (the cheque was from my mum). I took that cheque to a proper branch of the bank and paid it in on the 13th. I checked my account on the 14th to make sure that cheque was shown and found that both cheques were shown. I rang the bank immediately and they said that as the 6 days were passed the first cheque was cleared and the funds mine to use. I vehemently argued about that but the advisor was insistent that those were the rules. The bank told me that both cheques would be presented to my mum's bank and when I told my mum that she was concerned that if both cheques were presented, it would make her account overdrawn (the cheques were for £35,000), she was worried about this & was aware of the problems at the bank with the first cheque and so she decided to cancel the second cheque until it had all settled down.

In the meantime, as the bank advisor had been so insistent about the 6 days, I began researching, I checked the bank terms and conditions, wikipedia, the cheque clearing company, BCOBS, everything I could find and as you say it showed that the advisor was right and that as the 6 days had passed, certainty of fate applied and so although a windfall for me and a commercial loss for the bank, there was nothing improper.

I went to the ombudsman, but they operate on what seems 'reasonable' at a personal level to them, not on any legal basis, they said I should receive £500 due to the catalogue of errors from the bank but did not award the proceeds of the cheque. My view is that the bank had the cheque all the time, that they consistently lied to me and that they delayed in putting it on the account whilst running tests on it. I have read that at the processing centre they do various checks and I think that this cheque would have failed some of those tests for various reasons. I think when they received the replacement cheque they were reassured that it was all ok and they took a commercial decision to clear the funds on the first cheque (even though they knew it had been stopped) on the basis that the second cheque would clear. When my mum - who is 84 took the step of cancelling the second cheque it created this strange situation.

There is no question of fraud, if there was the bank would have said so and it was not a bank error, it was a considered, albeit reckless, commercial decision by the bank. As customers we have to bear the consequences of our errors, if we put the wrong sort code or account number for example, why should the bank be able to just put it's commercial loss to one side, ignore its contractural obligations and harass and force me to take actions. If it believed it had a claim to the money, it should have done what other service providers do, take a civil action. It has abused its privileged position as the holder of my account.

What is the point of the 6 day rules if the bank can simply ignore them when they want to?

I really appreciate you taking an interest in this and I hope I can convince you that this is a question of justice. I have tried to get a legal opinion but specialists in banking law seem to all work for the banks.

I'm off to check your reference, thanks again

[des8]

Re: Hello Lovely People!

Thanks for your clarification.
I wasn't intending to suggest you were acting fraudulently, but your first post was unclear.
My apologies for any inadvertent upset.

The banking rules, i.e. the 2.4.6 are, I believe, are only a code which the banking industry agrees to act in accordance with.
This does not make it law, and I think you would have a great problem winning in County Court.
Remember also you would be claiming £35000, and if you lost you could be paying the bank's costs, as this would NOT be on the small claims track.

I have to go out now, but I'll look again over the weekend at the "certainty of fate" position.

[Nicola Bell]

Re: Hello Lovely People!

thanks for your post, no offence taken, it is complicated so couldn't give all info in one go.

To date the bank has not taken this too seriously, presumably they would have known the ombudsman's likely outcome and might have thought that up to £500 would see the end of it. As you say the sum involved does not fit in the small claims track and the bank knows my financial position pretty well. However, very unusually, at the time I had £9,000 in my account in cleared funds and what the bank did was to take all of those funds and apply an overdraft for the remainder of the £35,000, leaving a big debit balance. They then began a programme of harassment (by way of phone calls and high charges) - even though we had registered a complaint and it was under investigation - until we put money in to bring the account to zero. As far as I can see, if I'm right, then the bank had no right to take those cleared funds from my account and I was thinking that perhaps the way to deal with this would be to go to the small claims court for the £9,000.

I have written to the bank asking what power it used to remove the £9,000 and they have written back to say that I requested it and so it was with my authority, but this is yet more nonsense and the evidence is clearly there in the bank statement that the bank took the £35,000.

I understand that the rules are rules and not law and that it is the banks that make the rules, the banks that sit on the C&CCCL, the banks that pay for the Ombudsman etc. but so far I have found nothing that says that the bank is allowed to help themselves to money from my account without a good reason, and their commercial loss is not a good reason to my mind. As I say, I thought we were with the 'ethical' bank!

Thanks for offering to help

[des8]

Re: Hello Lovely People!

The ethical Bank , also k/a the Co-operative?
If so the t&c of current a/cs para 2.2 confirms that: "You can assume that at the end of six Business Days, the cheque is cleared.After this time you are protected from any loss if thecheque is subsequently returned unpaid....."
The bank claims you gave them authority to remove the £35,000.
You dispute this. Have they ever provided proof of this authority?
Removing the £35000 put your a/c into o/d, for which they charged.
It seems odd that you would agree to them correcting their error and then be charged for it.

If you were to take it to court I think your cause of action would be that he Bank breached their contract with you by breaking their t&c's, and removed funds from your account without authority (if they cannot provide proof that you requested/agreed to their actions)

Assuming your Mother does not bank at the same bank as yourself there is no need to speculate on the decisions of the banks regarding the cheques.
If you paid a cheque in on 05/12/2012 it would not be possible for your mother to stop it on 13/12/2012 unless your bank had failed to put it through the clearing system.

The more I read your posts, the more I feel you possibly have a case.
However it is confusing, and you will have to convince a third party (the judge) of the justice of your claim. To do that you will have to present your case as simply as possible and not allow the bank to confuse the issue..
Perhaps the first step is to send the bank an SAR.
You will then be able to see what if any proof they have that you requested and authorised the debiting of your account.

[Nicola Bell]

Re: Hello Lovely People!

Hello des8,
thanks for reply and for checking the T&Cs etc, - esp so late!
yes, this is the 'co-operative' bank - though that's definitely a misnomer in this instance. My mum's bank is Nat West, so a different bank that uses a different cheque processing centre. And yes, the T&C's support my case, although the bank has another (obscure) reference on their web site that says that the 6 days do not start until the funds appear on the account and they have half-claimed that that is the relevant condition. I have no doubt they do this routinely and in most cases people would not follow it up. However, I think that the T&Cs must take precedence. In any event, the normal 2-4-6 guidelines do not strictly apply in the case of payments made through the Post Office; the bank's obligation is to make their own rules if they take such deposits and to make those rules clear to customers. Other banks T&Cs (e.g. Barclays) do state that the 6 days only start counting from the time the funds appear on the account. In my case, however, this has gone on for over 2 years and the Co-op has not changed its rules in that time, 2.2 has stayed the same.

It is only in the last week that the bank has replied about the £9000, saying that it was me that gave authority for the payment, but when I rang the bank even the 2 call centre staff agreed that it was one debit of £35,000 and our statement shows this. I have now to decide my next move. I agree that I should write to the bank with an SAR to ask what evidence there is that I requested this. However, obviously I know there will be none as clearly I didn't, so what would happen then?

I agree that it is confusing and it would need to be kept simple for a small claim, that is why I thought to perhaps separate the £9,000 that was in my account from the £35,000 and to put the bank in a position where it must explain it's action and to make that the issue that the judge looked at.

If it went as a breach of contract, do you think that a judge would just say that I had suffered no loss or might they agree that the money was legally mine and that there was therefore a loss.

Finally, you have taken a lot of care in this, for which I am very grateful, and you clearly know what you are talking about, can I ask if you are a lawyer yourself?

(I have to go out for the day at 10.30 for a long-distance relatives trip)

[des8]

Re: Hello Lovely People!

Trust your trip went well and you had a good day.
First things first : no, I am not a lawyer, and accordingly (as with any forum) you should be careful about acting on what you read.
People on this forum do give honest opinions, and are generally reliable, but everyone is capable of making mistakes.

I think you have put your finger on your main hurdle, i.e. whether or not you have suffered a loss.
Presumably the £500 (was it paid/did you accept it?) covered the charges etc levied by the bank when they put you into overdraft.
If it did the argument will be that your are in the position you were before the first cheque was deposited and therefore you have no loss.
However you could argue that as the bank confirmed the money was yours, and this was in accordance with the T&Cs that form part of your contract with the bank (T&Cs which are drawn up and imposed by the bank) they have breached their contract with you by removing that money from your account and so you have lost.
Against this the argument is that the money was credited to your a/c by mistake, and you cannot profit because of an error.
I cannot guess how a judge will jump

I was hoping others would come along with other avenues to explore, but it seems a bit quiet at the moment. Weekend I suppose!

Presumably you have exhausted the Co Op's complaints procedure (including letters to CEO)
It may be that if you start a claim that falls into the small claims track they will make another offer.
After all it will cost them to defend, plus the possibility of more bad publicity.

[Nicola Bell]

Re: Hello Lovely People!

yes, good day thanks, hope you did too.

I think you have outlined all the issues and I guess the main issue is whether it will be possible to convince a judge that the cheque had cleared in accordance with the T&C's as once it is in my account as cleared funds I think that the bank cannot take it out without good authority.

I did not accept the £500 as that would have meant I would have accepted the FoS' decision, (which I don't) and that would have been the end of it. The bank removed the charges when I re-balanced the account under duress. I take your point about the judge and I think I don't have too much too lose going to a small claim court, but I'm not sure if there are any legal arguments I could be missing. I genuinely don't think it was a question of 'bank error' as it was a considered decision by the bank, it was checked by the clearing department and the bank rang me at least twice at the time to confirm it was cleared as I did not believe it at first. The bank is not providing a copy of the second and most crucial call.

In my view this was a risk taken leading to a commercial loss, like buying a lottery ticket that doesn't win or shares that go down in value the next day, I don't think that's a 'bank error', an error of judgement maybe but not done by mistake.

When I initially raised the £35,000 with the co-op, writing to head of retail banking, they quickly put it in the complaints procedure, I had one letter, then a final letter and told that was the end of it unless I wanted to go to the ombudsman, which then took over a year.

I will write to the bank tomorrow and can send you a copy of the letter if you're interested.

Can I ask, if you're not a lawyer, how you have this sort of knowledge and why you're helping people, I haven't looked at your other posts but I can see you have a lot of posts and a lot of thanks), whatever the reason, this is the first time someone has considered the issue in any detail and I'm grateful for that.

best wishes

Nicola Bell

[des8]

Re: Hello Lovely People!

Have you sent the bank an SAR? It might show the missing phone call?

A brief CV
After school: 4 years in Portuguese University Included study of canon law and Napoleonic code.
Joined London Insurance market, Chartered Insurance Institute exams (includes law).
Specialised in insuring banks... studied banking law
1975 disillusioned with city life, dropped out and started living.
Now retired but busier than ever.
I was very fortunate having received a superb education (I think)and just like trying to help when others (perhaps less fortunate) are in trouble.
Sometimes you get it right, sometimes you don't, but you keep learning!

[Nicola Bell]

Re: Hello Lovely People!

hello,

wow interesting background and I can see where you're coming from on this, well done!

Thanks for the suggestion of the SAR, I have sent one to obtain the second call, however, the bank maintains that they are only able to trace the first call, even though the second call was to the same number between the same people and a few hours after the first. I followed it up with the ICO but they said that the bank was not breaking their principles if it was unable to trace it. There are a lot of brick walls around!

regards,

Nicola