Media and Public Affairs
People who still write cheques made payable only to a bank or building society may have their cheque declined by their bank or building society after 30 September 2006.
To safeguard against fraud banks and building societies now recommend that extra details like the name or account details of the beneficiary of the cheque should be added. More tips on safe cheque writing practice can be found below.
The new arrangements are intended to make it absolutely clear who should benefit from the funds and help prevent fraudsters paying in stolen cheques. Banks and building societies hold accounts of millions of customers. If the cheque is made payable simply to "XYZ Bank/building society", there is nothing to identify which account the money is meant for.
By making a cheque payable to "XYZ Bank" and adding the "account number" or "name" it is clear who the funds are intended for. Cheques made out to personal or business customers will be unaffected.
These changes were announced last December and since then, the industry has, been advising people to start adding the extra details immediately, through leaflets and information on cheque books and statements.
The industry has worked closely with the Financial Services Authority, the independent body that regulates the financial services industry in the UK, on this initiative. The revised procedures are consistent with advice given in The Banking Code.
TOP TEN TIPS FOR WRITING AND RECEIVING CHEQUES
Receiving a cheque
1. Never accept a cheque, or banker's draft, from someone unless you absolutely know and trust them. Be especially wary when accepting a high-value cheque or banker's draft.
2. Be aware that a banker's draft is not necessarily safe from fraud. If you receive a banker's draft in payment for goods you must allow time for the draft to clear before releasing the goods. Banker's drafts can be stolen or altered like any other cheque and if it is altered, stolen or counterfeit it will not be honoured.
3. Be aware that, even after the value of the cheque or banker's draft has been credited to your account, there is a risk that the money could be reclaimed if the cheque or banker's draft subsequently turns out to be stolen or counterfeit.
4. Always consider other types of payment for high-value items - such as a automated phone or internet payment (takes three working days) or a CHAPS payment (a same-day service). There is a charge for a CHAPS payment but it is a guaranteed, irrevocable, same-day value payment. If the buyer is unwilling to pay the relatively small cost involved - or to split it with you - then you need to be on your guard.
5. Cheques should be paid into your account as soon as possible to reduce the risk of loss or theft and should always be paid in within six months as older ones may be returned unpaid.
Writing a cheque
6. If you are making a cheque payable to a bank or a building society, do not make the cheque payable simply to that organisation. Add further details in the payee line, for example XYZ Bank, re J Jones, account number xxxxxx. (The rules for accepting cheques at banks and building societies are changing from October 2006, in order to safeguard against fraud. After this date, if you try to deposit a cheque in a branch, or by post, made simply to a bank or building society, it may be returned.)
7. You should draw a line through unused spaces so unauthorised people cannot add extra numbers or names.
8. If it is necessary to make amendments, these should be made clear by crossing through the error and initialling or signing the correction.
9. Never presign blank cheques. When writing cheques, be sure to complete all sections, including the payee name, and the amount in both words and figures. To help prevent fraudulent alteration it is good practice to leave as little blank space as possible. It is also good practice to include the word 'only' after writing the amount in words.
10. Always be sure to date cheques - undated cheques are likely to be returned with a request to include a date.
Commenting on the changes, Ian Mullen, Chief Executive of the British Bankers' Association said,
"The new arrangements reflect the importance that financial institutions place on fraud prevention. Although the instances where fraud has occurred in these particular circumstances are fortunately few, it is crucial that the industry continues to make life for the criminal as difficult as possible. The new measures are simple, but provide additional security when a cheque is made payable to an institution such as a bank or building society and follow good practice guidance that is included in the Banking Code."
Commenting on the changes, Adrian Coles, Director-General of the Building Societies Association said,
“It came to our attention that cheques which were written only to an institution, not a named account, had been used in a fraud. We want to stop that happening again. It is important people get into the habit of adding extra details to their cheques rather than risk a cheque being declined or their money being fraudulently deposited into someone else’s account."
Commenting on the changes, Paul Smee, Chief Executive of APACS said,
"Although most of us are handling cheques less and less - on average, we only pay in one cheque every two months - this small change to the way we write them will have a big impact on fraudsters. Thankfully most customers do this already but we want to reach those others who’ve not changed how they write cheques yet to reduce the opportunities for criminals to commit fraud, as well as minimising the chances of anyone falling victim to this type of scam. This is a positive change that is definitely worth making."
More information on how to write cheques can be found at http://www.bsa.org.uk/consumer/factsheets/cheques.htm
From October 2006, cheques that are payable simply to a bank or building society and which are not being paid into the drawer's own account are likely to be refused by the bank or building society involved. The new arrangements will not affect payments being paid into the drawer's own account, or cheques used to pay a utility bill or credit card bill in the drawer's own name. Cheques payable to an individual or other business will not be affected. In 2005 there were over 1.9 billion cheques processed in the UK but only a small number are made out to financial institutions and will be affected by this change. Cheque fraud in the UK amounted to £40.3m in 2005 (down 13% on 2004).
2. The British Bankers' Association (BBA) is the principal trade association for banks operating in the UK. It has 218 member banks and many professional associate members. BBA member banks collectively employ over 400,000 staff in the UK.
3. The Building Societies Association is the trade association for the UK's building societies. There are 62 building societies in the UK with total assets of over £270 billion. About 15 million adults have building society saving accounts and over two and a half million adults are currently buying their own homes with the help of building society loans.
4. APACS is the UK trade association for payments and the authoritative voice on issues such as cards, cheques, cash, clearing systems and payment fraud. It currently has 31 members whose payment traffic accounts for more than 97% of the total UK payments market.
6. Photographs of Ian Mullen are available from the BBA press office, or from the BBA website www.bba.org.uk
7. Photographs of Paul Smee are available from the APACS press office or from the APACS website at www.apacs.org.uk
8. APACS publishes a booklet called Cheques & Cheque Clearing The Facts, which provides an overall picture of how cheques work. A PDF of this booklet is available to download from www.apacs.org.uk