Can the bank ‘UNCLEAR’ cleared funds?

[Amethyst]

Re: Hello Lovely People!

But you cancelled the first cheque - well your Mother did - so you knew it had been cancelled and wouldn't go through ?

Anyway that aside I think you are wrong

Once the 6/8 days are passed and the cheque cleared, the funds are mine and as far as I can see the bank has no right to take them back.

The bank has no right to automatically remove the funds from your account - it doesn't mean they are yours - just the bank can't just remove them from your account and would need to organise repayment of the sum with you.

[Nicola Bell]

Re: Hello Lovely People!

I don't deny I may be wrong, but I haven't seen any convincing legal basis for that view yet. I am genuinely exploring the issue.

You do seem to agree that the bank did not have the right to remove the funds from my account, can I ask why you take that view if you think that I owed the money?

Honestly, I didn't remove the money until the bank had convinced me - in very forceful terms - that the funds were cleared and mine permanantly. I told them this must be nonsense, the bank knew that the cheque had been stopped but they assured me that under the rules the funds were mine. If the bank would make the tape available you would be able to hear for yourself.

I took another look at the link you gave before and that seems to be for business accounts and mine is a personal account, so the terms you quoted would not apply.

[Amethyst]

Re: Hello Lovely People!

The system is there to protect people from getting into the position you got in - where the funds were removed without any notice. However you knew the cheque paid in on the 5th was cancelled, and you knew the second cheque had only been paid in on the 13th.

The 2-4-6 is only industry guidance not legislative as far as I can make out - The Bills of Exchange Act 1882, and the Cheques Acts of 1957 and 1992.

Had the cheque been payment for something, like a car, that you had released to a purchaser once the cheque had cleared and been withdrawn, then I'd probably be more in agreement with you, as you'd have LOST the £35k BECAUSE of the banks actions and what they told you - and I feel that the FOS would also have been in agreement with you there - and the bank would have to go after the payee to get the money. However, you still had the £35k off of your mother, you knew the first cheque had been cancelled, the second cheque was well within the 6 days, and the cock up by the bank caused some inconvenience and hassle which the FOS ordered you be compensated for.


HSBC http://www.hsbc.co.uk/1/2/contact-an...heque-clearing

[Amethyst]

Re: Hello Lovely People!

Actually do you have a copy of the FOS adjudication ?

[Amethyst]

Re: Hello Lovely People!

Okay looking at this from a solely legal viewpoint then what's the question ? - if a cheque is returned unpaid after T+6 and it has been withdrawn by the payee, who does the money legally belong to.

The Payer has given the cheque as a promise to give the money to the bank

The Bank pays the payee on the understanding the money will be given to it by the Payer

The Payer doesn't pay the Bank

Is it the Banks loss to chase the Payer ? Is it the Banks loss with no comeback against either party ? or Is it the Banks loss to chase the Payee ?


1957 Act
4 Protection of bankers collecting payment of cheques, &c.

(1)Where a banker, in good faith and without negligence,—

(a)receives payment for a customer of an instrument to which this section applies; or

(b)having credited a customer’s account with the amount of such an instrument, receives payment thereof for himself;

and the customer has no title, or a defective title, to the instrument, the banker does not incur any liability to the true owner of the instrument by reason only of having received payment thereof.

(2)This section applies to the following instruments, namely,—

(a)cheques [F1(including cheques which under section 81A(1) of the Bills of Exchange Act 1882 or otherwise are not transferable)];

(b)any document issued by a customer of a banker which, though not a bill of exchange, is intended to enable a person to obtain payment from that banker of the sum mentioned in the document;

(c)any document issued by a public officer which is intended to enable a person to obtain payment from the Paymaster General or the Queen’s and Lord Treasurer’s Remembrancer of the sum mentioned in the document but is not a bill of exchange;

(d)any draft payable on demand drawn by a banker upon himself, whether payable at the head office or some other office of his bank.

(3)A banker is not to be treated for the purposes of this section as having been negligent by reason only of his failure to concern himself with absence of, or irregularity in, indorsement of an instrument.

[Amethyst]

Re: Hello Lovely People!

BoE Act 1882

47 Dishonour by non-payment.

(1)A bill is dishonoured by non-payment (a) when it is duly presented for payment and payment is refused or cannot be obtained, or (b) when presentment is excused and the bill is overdue and unpaid.

(2)Subject to the provisions of this Act, when a bill is dishonoured by non-payment, an immediate right of recourse against the drawer and indorsers accrues to the holder.


Otherwise, urrghhhhhh, not the right time of year to be trying to get my head around the Bills of Exchange Act

[des8]

Re: Hello Lovely People!

But you cancelled the first cheque - well your Mother did - so you knew it had been cancelled and wouldn't go through ?

Anyway that aside I think you are wrong



The bank has no right to automatically remove the funds from your account - it doesn't mean they are yours - just the bank can't just remove them from your account and would need to organise repayment of the sum with you.

After 6 business days (8 if deposited via post office) a cheque deposit to an account cannot be withdrawn by the bank unless they can show fraudulent activity by the depositor.
The funds DO become those of the depositor.
If a cheque is cancelled after that date by the drawer, and the cancellation is effective it must be because of an error by the bank(s) and these rules were introduced (2007?) to protect customers from the effects of that error. Previously banks were able to correct their errors any time they discovered those errors, months or even years later!

The first cheque was deposited 5th Dec , but under the 8 day rule was not of certainty until end of 17th Dec.
The Bank advised to cancel that cheque on 13th Dec, which was done, and a replacement cheque issued.
The Bank then advised (wrongly) that the funds were of certainty on 17th Dec (which would indicate to op that the cancellation of 13th Dec was unsuccessful)

We are not talking about morality here (never affected the banks anyway) but the rules they built into their contracts.
They gave wrong advice to OP, based on poor knowledge or lack of training to staff
The ombudsman ruled on the basis the cheque did not reach the bank until 13th Dec. The operative date surely should have been 5th Dec (date of deposit).
When fuller info became available I worked on the 8 day cycle (but omitted to take the second week into account [must be old age creeping up] & so my apologies for confusing matters further)
Because the 1957 & 1992 Acts. and case law. gave the innocent depositor of a cheque no protection from fraud by the drawer, or from stolen cheques, it was at the insistence of OFT, that the new rules were introduced. The Cheque and Clearing Co. manage the clearing system.

If the 6 day cycle had applied I do believe Nicola had a valid argument for retaining the windfall.
As it is an 8 day cycle I think the bank got there just in time!
True Nicola would have benefited from the bank's error, and this would be a most unusual event, but would this be wrong?
The benefit would have come from implementing their rules.

And would the argument win in court? I somehow doubt it.

Happy Christmas

[des8]

Re: Hello Lovely People!

The 2-4-6 is only industry guidance not legislative as far as I can make out - The Bills of Exchange Act 1882, and the Cheques Acts of 1957 and 1992.

But the 2 4 6 rule is included in the terms and conditions imposed by the bank, and so becomes part of the contract between bank and account holder.

[Nicola Bell]

Re: Hello Lovely People!

Thank you both,

I don't know these laws quoted by Amethyst and it sounds like they're complicated, so won't worry tonight. I also can't find the decision, it was 25th September this year but I can't find it now, I'll keep looking......, it is public so no privacy problem.

It seems that the definition of the 'day of deposit' is important, is it the day I make the deposit, i.e. the Wednesday? Or is it the day after I pay it in? If the Wednesday, then the following Friday would be the last day for the bank to reclaim it wouldn't it?

If the deposit is the day after, then it will be game over and we can all just enjoy Christmas!

Nicola

[des8]

Re: Hello Lovely People!

If you deposit on Wednesday, the first day is Thursday.
The rules apply to whole clear days, and so the funds are only subject to certainty at the end of the 6th (or 8th) day. which essentially means you can't draw on them with certainty until the 7th (or 9th) day.

Sorrymasdopey: but enjoy Christmas

[Nicola Bell]

Re: Hello Lovely People!

so the day of deposit is not the actual day of deposit?

[Nicola Bell]

Re: Hello Lovely People!

hi,

Des8, I've checked and it does say the business day after the day it is paid in is the first day, so I accept that this is game over. The bank leaves itself in a perilous position but it will not be me that tests the issue and at least we have a good understanding of the issues if someone else is in a similar position!

I have learnt a lot and have enjoyed the to-ing and fro-ing on the subject and researching the topic, the site has been very useful and I'd like to thank all contributors, but now off to do some other sort of 'wrapping up'!

Merry Christmas everyone and keep up the good work

xx Nicola

For reference Amethyst the following was the Om's decision you can see that it does not meet Des8's high standards of evidence or analysis!



complaint
Mr F and Ms M complain that The Co-operative Bank Plc debited the proceeds of a cheque from their
account when it had no right to do so.
background
I issued a provisional decision on 15 July 2014 in relation to this complaint. Mr F and Ms M
said I should require The Co-operative Bank to refund the proceeds of a cheque Mr F and
Ms M had paid into their account as it had cleared under the “certainty of fate” principle. In
my provisional decision I said I was not minded to do so because I was not satisfied the
cheque had cleared under the “certainty of fate” principle. I was, however, minded to require
The Co-operative Bank to pay Mr F and Ms M £500 in compensation for the distress and
trouble it had caused. Both parties were invited to comment.
The Co-operative Bank wanted to make sure I had listened to a phone call between Ms M
and it saying that it had explained the position clearly in that call. Otherwise it was happy
with my provisional decision.
Mr F and Ms M sent a detailed response in which, in summary, they disagreed that the
cheque had not cleared under the “certainty of fate” principle as well as saying that The Cooperative
Bank had not acted in line with its terms and conditions or industry practice.
my findings
I have considered all the available evidence and arguments to decide what is fair and
reasonable in the circumstances of this complaint.
In my provisional decision I said that I was satisfied that the cheque in question did not arrive
at the cheque clearing centre until 13 December. In the circumstances, I said that I was
satisfied that 14 December was day two of the cheque clearing cycle. Mr F and Ms T
disagreed. They said that cheques, according to The Co-operative Bank’s terms and
conditions, clear no more than six business days after they are deposited via the Post Office.
They said that this meant the cheque they had deposited would be treated as cleared for
“certainty of fate” no later than 14 December.
I do not agree with Mr F and Ms M. I say this because I am satisfied that the cheque in
question did not reach The Co-operative Bank until 14 December as a result of delays that
were outside of its control. The cheque could have easily arrived a day later. Mr F and
Ms M’s argument means a cheque could clear under the “certainty of fate” principle before
The Co-operative Bank had even received it, let alone begun the clearing process. More
importantly, I am satisfied that Mr F and Ms M had arranged for the cheque to be cancelled
before it had even been received by The Co-operative Bank. In the circumstances, I cannot
agree with them that the cheque had cleared under the “certainty of fate” principle. I remain
of the view that 14 December was day two of the cheque clearing cycle.
I also remain of the view that it would be appropriate to require The Co-operative Bank to
compensate Mr F and Ms M for the distress and trouble it caused. I say this even though
The Co-operative Bank’s response implies I should not do so. I am satisfied that The Cooperative
Bank could have handled this matter much better.
Ref: DRN82433302
my final decision
My final decision is that I require The Co-operative Bank to pay Mr F and Ms M £500 in
compensation for the distress and trouble it has caused.
Nicolas Atkinson
ombudsman
Ref: DRN8243330

[des8]

Re: Hello Lovely People!

The actual terms and conditions say " When you pay a cheque into your account you will have to wait a maximum of ....Business days AFTER the Business Day it has been paid in..."
so whilst you deposit one day, the counting does not start till the next.

[Amethyst]

Re: Hello Lovely People!

Sorted then, agree with you Des OTHER than the 5th Dec Deposit date - that cheque was cancelled - because Nicola knew it was cancelled ( as she was party to cancelling it) the only cheque Nicola could have thought was going through was the one deposited on the 13th December so the entire argument fails on that point regardless.

Happy Christmas.

[des8]

Re: Hello Lovely People!

Hi Sharon'
Sorted, but you and I will continue to go round in circles on this
Happy Christmas