Until recently it was thought that the cheque clearing cycle takes three working days and that was the end of the story. But now banks are saying that the cheque clearing system doesn't always clear cheques and they can never guarantee that a cheque will not be withdrawn.
Payments by cheque can be taken back from a bank account months after a bank has cleared a cheque and credited an account, according to the FSB. The banking industry has even admitted that cheques are not a safe way of transferring funds and is urging businesses to consider alternatives.
FSB National Chairman Carol Undy said, "Banks are saying that they can never guarantee that they will not withdraw a cheque and that it can always be cancelled later. This places businesses in an impossible situation. Banks are in the business of risk but it appears they are determined to shift this risk onto businesses by the back door.
"If this really is the death of the cheque then the banks should be up front about it rather than employing such clandestine methods. What has been revealed so far is just the tip of the iceberg, and it is an issue of such importance that we are not prepared to let it drop."
Read related items on:
Legal and financial services
Federation of Small Businesses