Common problems we seeincasesinvolvingcheques
Cheques are not as simple asmany Canadiansthink! At OBSI, we find thatpeopleoften misunderstand the rules relating to cheques and this cancausethemto losemoney, fallvictim to frauds, andhaveproblems with their financial institution.
What is a cheque?
A cheque isawrittenpromise from onepersonto payanother. A cheque isa document thatinstructs thebank to paya certainamountof moneyfrom one account toanother.
A cheque isNOTa guarantee you will receive the promised money.For example, thecheque must be properly writtenand thecheque-writermust have sufficientmoneyin their accountto paytheamount promised.
How a chequeisprocessed
Achequemustbe processed or"cleared"bythebankbeforethe money promised by the cheque belongs to you.Even ifthe moneyfrom the chequehas beendeposited into your accountyou may not be entitled to keep it if the chequedoesn't clear.
Abankwill clearachequeif itisproperly written, thereis enough moneyin thecheque-writer'saccount, and if there are no other problems with the cheque(like fraud, duplication, or a stop payment).Adepositorcannot keep moneypromised by a chequeifthe chequedoesnot clear. For example, if you deposit a cheque into your account and it is fraudulent, or there is not enough money in the account of the person who wrote the cheque to you, the bank willreverse the deposit and take the money back.
Many people think that cheques can be cleared quickly-likein 3 or 5 days.Banks have much longer than that -upto90 daysorevenlonger- to reverse a cheque deposit if it turns out that the cheque-writer does not have the money they promised or that there are other problems with thecheque.
Common problemsthatcanarise with cheques
We see some commonmisunderstandingsand problems related to the use of cheques. These include:
Various types of cheque fraud that take advantage of the delay between the time a cheque is deposited and the time it clears. For example:
fraudsters "accidentally"send a chequefor toomuch money to a victimandthentrick the victim into sendingback theoverpayment. After the victim has sent the fraudster money, the problem with the original cheque is discovered and the original deposit is reversed,andthe victimhas lostthe overpayment amount.
Early deposits-when apostdated chequeis deposited earlier than expected.
Late deposits-whenachequeisdeposited much later than expected.
Duplicate deposits-when achequeisaccidentally or intentionallydeposited more than once.For example,by electronic deposit andthen paper deposit, or multiple times by electronic deposit.
Stop payment orderson chequesnot working.
Forgery-the alteringofwords or numbers on a legitimate chequefor dishonest purposes.
Holdsoncheques
Banks have the right toput a hold on cheques deposited intoyour account.A "hold" prevents you from accessing the money promised by the cheque for a set period of time. Banks usuallydetermine the hold period based onhowthe chequewasdeposited and the amount it was for. Generally, the hold periodwon'texceedfourto five days for cheques less than $1,500 and seven toeightdaysfor cheques over $1,500.
Whenabank confirms the cheque is valid and thereissufficientmoneyavailablein the cheque-writer's account,the bank canthendeterminewhether to continueor lift a hold.
Even when a hold is placed, banks mustgenerallymake the first $100 available to consumers for withdrawal.It is important to remember, though,that this $100 can still be taken back if the cheque does not clear. Also,theendof a hold does not mean the cheque has cleared- the cheque could still be rejected later. If the cheque is rejectedlater,the bank will take the moneybackfromthedepositor'saccount.
To learn more about cheques and hold periods, pleasevisit the link below:
When we reviewdisputes aboutcheques, we consider:
Consumersareresponsible for any cheques deposited into their account. Theyshould act reasonably and use common sense when receiving paymentsby cheque and depositing cheques.For example, they should:
only deposit cheques from trusted sources
be alert to signs of fraudand exercise reasonable caution
takereasonable stepstoprotect their cheques, including:
keeping their cheques and banking information in a safe place
safely destroying any documents/cheques/statements that may contain personal information
regularly checkingtheiraccount online and reviewingtheirmonthly account statements
review their bank statements regularly and report problems with deposits or withdrawals quickly.
Banksare responsible for following the payments rules,honouringtheiragreements,and treating their customers fairly.For example:
they shouldact toinform andprotect their customers where it is reasonable and possible to do so,though their obligations are limited.For example, if signs of fraudcome to the attention of the bankthey shouldact reasonablytoinform the consumerof their concerns.
if the dispute is about a hold, we will consider whether the bank had a valid reason for the hold and if they did it in a fair manner, for examplewe will consider:
whetherthe bankhadreason to suspect the cheque was fraudulent
whether there weresufficient funds available to cover the amount the cheque
whetherthe bank followed the appropriate rules for placing a hold.
Canada's payments rules impose certain timelines that banks have to follow whendealing withone another andreversing payments.
Canada has laws thatprotectthe rights of people who have received cheques - especially if duplicate cheques have been created and deposited.
