Outwitting 'galah' banks and antiquated rules

By Peter V O'Brien

Friday 6th September 2002

Some heavyweight trading banks should heed the legal adage that unenforceable law is bad law and should be repealed or amended.

Bankers apparently have "rules" that it takes several days to clear cheques. Some reckon clearing bank cheques takes two days, irrespective of the issuer.

Special answers (for a fee) or telephone contact with the people who issued the cheque are necessary before the money becomes "free funds," either overnight or immediately upon deposit.

There was a day when the immediate free funds principle applied, without any further requirements. Not so now in some cases, apparently relying on the precedent of court rulings.

The argument is that a bank cheque can be stopped for various reasons, including the situation where it could have been lost or fallen into the wrong hands.

An actual case exemplifies what can happen. The case was considered strange among the parties to a transaction, since the cheque was drawn on a solicitor's trust account at bank A.

All parties, including the banks, will remain anonymous, to keep the peace. The case got stranger as it developed.

Bank A issued a bank cheque drawn on a solicitor's trust account. The payee was advised to deal with the bank in which the cheque was to be deposited to check out clearance.

Up popped the two-day clearance rules, which, may or may not have been specific to the recipient institution.

The only ways out were a special answer or a telephone contact with an officer of the recipient bank and those who physically authorised and signed the cheque for the issuer.

The cheque was duly handed over and taken for deposit in bank B.

The situation regarding the desire for immediate/overnight clearance was explained to a helpful bank B officer not one of those who made the rules.

The helpful bank officer telephoned the issuing bank to get clearance from one or both of those who physically issued the cheque in bank A's particular branch. The officer called through the call centre (probably located somewhere in Mongolia) to the branch.

First problem: the telephone in bank A's branch is unanswered, despite the officer holding on, holding on and calling again. Helpful bank B officer thinks bank A's branch staff are busy.

The depositor suggested a special answer, though bank A's head office branch was only a few hundred metres away.

The helpful bank officer in bank B explains it is too late in day, being 3.45pm. Remember, banks close for public dealing at 4.30pm and bank A's head office/main city branch is a few hundred metres away.

Staff being busy is a common explanation for people leaving telephones unanswered, assuming one can eventually break the wall of call centres, which seem instructed not to put callers ("customers," "clients") through to the branch with which they want to deal.

The depositor at bank B at this stage is fuming but not in any way against helpful bank officer. No, fuming about the system and the galahs based in Australia and the UK who run these outfits and set the "rules."

The depositor eventually, and reluctantly, accepts the helpful bank officer has done the best possible, far above what the galahs deem reasonable, and decides to wait until next day and try again.

The depositor reckons there is a little matter not known among the various banks' staff.

Sure 'nuff. Next morning it is shown that no galah told machines about the "rules."

Before any bank staff arrived at work the depositor at bank B (a) did an eftpos transaction, (b) withdrew cash, (c) transferred funds from a cheque account to a credit card account, all above the approved limit if bank A's cheque was not free funds.

This is common knowledge among informed bank customers. Bank a cheque one day and you can draw from an ATM the next, unless the cheque has paid a credit card liability to your bank and you want to draw cash.

The banks apparently protect their own backsides and let everyone else look after theirs.

The helpful officer at bank B was surprised when the facts were presented.

This nonsensical saga raised serious points:

* The air at the top of the overseas-owned banks' head offices, whether in Australia or London, must be very thin, causing administrative giddiness among the rulemaking galahs (twits in the case of the UK);

* New Zealand operations of overseas-owned banks are grossly understaffed in the interests of cost reduction for shareholders and a "bugger the customers" attitude;

* Any legal rules about clearing/stopping bank cheques are garbage;

* A person/organisation drawing a cheque is responsible (or should be) for honouring it. Non-transferable, crossed cheques, minus "or bearer," made out to an individual are supposed to be failsafe, assuming the depositor has appropriate identification that should apply to bank cheques;

* Banks' "rules" are unforceable in an electronic machine age, unless the galahs change the software (a massively expensive task) for everyone except the banks' accounts;

* The galahs, who glory in state-awarded honours for "services to the banking and financial services industry," have inflated delusions of grandeur commensurate with the inflated incomes they receive for dreaming up unenforceable law;

* Coalface working bank officers should have the galahs' jobs; and

* Long-suffering customers of overseas-owned banks can outwit the galahs.

Comments from our readers

No comments yet