Jan 282011

As someone who has spent their entire working life in banking and finance, I am always dismayed when I hear or read of degradation of the understandings & teachings I received as a banker.

For example, I was taught that under the Bills of Exchange Act 1909 a Bank Cheque was “issued in good faith for business transactions” . That a Bank Cheque must NEVER be issued against anything other than cleared funds, ie: cash or the equivalent. That a Bank Cheque WAS in and of itself, clear funds, able to be drawn upon immediately once deposited. Not anymore, apparently. Bank Cheques are still only issued against clear funds, still considered to be issued “in good faith for business transactions”, but it seems that faith isn’t as solid as it was when I was jumping counters. Once deposited to the account of the person to whom the cheque is made, said the proceeds are then classed as non-recourse, unclear funds, subject to five-to-seven working days clearance through the banking exchanges system. As a banker, trained in the understanding of the Bills of Exchange Act 1909, I find these stipulations ridiculous in the extreme.

To treat a Bank Cheque as unclear funds is to deprive the recipient of those funds while the Bank exchanging said cheque enjoys those funds in what the exchanges system terms ‘float’ for the period of clearance. So, if you received & deposited a Bank Cheque as the proceeds of a business transaction, the person who gave it to you MUST by dint of any Bank’s issuance procedures, have paid for it with either cash or clear funds, yet YOU are not permitted to enjoy those clear funds for between 5 and 7 days. The Bank, on the other hand, enjoys the 5 to 7 day ‘float’ which all institutions manage on a daily basis on what is euphemistically termed the ‘short term money market’. The Bank is making money from your money.

Okay, so as someone who has spent the last 38 years in banking & finance, why am I suddenly surprised of this change in processes? I’m not in the least surprised, but disgusted more the point. This bogus clearance regime which all banks have colluded upon, is a fraud. Cheque exchanges occur twice daily in major capital cities. That’s the physical paper exchange. The electronic exchange of dollar amounts happens on a much more regular basis.  Banks no longer ‘read’ cheques for regularity. In pre-automation days, cheques were ‘read’ to ensure they were valid bills of exchange in terms of the legislation. Signature, date, amount in words & numbers agreed, negotiability or not determined by the crossing of the cheque, third party ownership and recourse. In these times of electronic transmission, I seriously doubt more than the MICR line(Magnetic Ink Character Recognition) and presence of a signature is assessed for validity. The cost to financial institutions of reverting to manual – read: people-based validation systems – would simply out-weigh the risk of the odd dud cheque getting through. So, if the risk of not validating bills of exchange is out-weighed by the cost to the monetary systems of doing so, why are financial institutions permitted to salve this risk by fleecing their customers who engage in normal business transactions using clearly funded bills of exchange?

To further exacerbate my angst, disgust and disappointment in a system which taught me everything I know, I was personally subjected to the training inadequacies evident in the banking game yesterday. Note the following cheque/graphic, from which I’ve deleted payee name.

Bank Cheque

Three important things to note:

  • It is a Bank Cheque – ostensibly, clear funds;
  • It is made payable to ‘bearer’ , which means the ‘bearer’ of the cheque or whomever has ownership of that cheque, may negotiate it;
  • It is closed to across-the-counter negotiations with the disclaimer “NOT NEGOTIABLE – ACCOUNT PAYEE ONLY”

The first is self-explanatory, the second refers to one of two definitions of ownership. ‘Bearer’ – whomever has hold of the cheque at any one time, and ‘Order’ the person the cheque is made payable to and ONLY that person. This cheque is somewhat unique in my experience, as I have never before seen a ‘bearer’ bank cheque. However, that is NRMA’s issue and doubtless they issue their Bank Cheques in such a manner as to provide people like me with a means of paying for a motor vehicle with the proceeds of their written off insured vehicle by doing what I did and signing the cheque over to a car yard. I can do that because I am the ‘bearer’ assigning clear right & title to the cheque, to a car yard. See the next graphic of the reverse of the cheque.
reverse of Bank Cheque

The third dot-point is common practice and sensible for any business cheque. An uncrossed cheque is open to across-the-counter negotiation and can be converted to cash, although in the current age of ignorance, I sincerely doubt any bank, anywhere would convert any cheque to cash unless the person presenting is ‘well and favourably known and considered good for recourse’. Recourse being the ability to recoup funds from the recipient in the event of a loss.
The car yard I was dealing with accepted the indorsed (not endorsed) cheque in the full understanding of what it was, what it then became – a third party cheque – and fully expected their bankers would do likewise. Of course, banks being what they are today – sales points for a variety of financial products, but definitely not service or financial advisory points with an understanding of what banking really is – the Bank of Queensland branch where the dealer had it’s account refused to accept the third party cheque. No valid rational given for the refusal, simply would not accept it as a proper bill of exchange. I know full well why BoQ would not accept the cheque, and that comes down to sheer ignorance of what a third party cheque is, what it should look like, what the implications for recourse are and essentially what the risks of acceptance would be.

Banks like Bank of Queensland don’t train their staff in any aspects of banking other than sales. Their branch managers are, in the main, not bankers or have any genuine banking experience. They are sales people. Not people trainers or people managers. That’s not their fault, it’s the fault of the industry as a whole. There are no genuine bankers anymore. There are sales people and mindless, under-educated  ‘customer service officers’ who wouldn’t know about, and aren’t trained in the art of real customer service. Nor are they supported for any initiative the rare individual might chose to exercise in the pursuit of responsible decision-making. Don’t make a decision, then you can’t be held responsible for anything. This is the ethos behind the Bank of Queensland branch refusing point blank to accept a valid bill of exchange. Shock Horror! A third party cheque. In my day behind a counter, a very common occurrence and one we were all trained to identify and assess the risk of. We were also expected to take responsibility for our actions, but supported by management for those decisions taken in good faith, with sound rationale, for the benefit of the customer.

This is the sad, changed
face of banking. No service, poor training, no knowledge skills to speak of, risk averse and no thought of the customer, only of the bank and it’s bottom line. Funny thing though, prudent management theorem says the customer you keep happy, is more valuable that the two you’ll need to find to replace him/her when they get cheesed enough to leave. When I worked for the NAB, back in 1983 a big customer service push was on, called C.A.R.E., an acronym for Customers Are Really Everything. It meant a lot to me and sank in as the purest form of customer service. Exceed the customer’s expectations. No need, no sale. Now it’s all about the sale, bugger the need, for the need rests only the bank’s side according to current customer service ethos. “is there anything else I can do for you today?” Yes there is. You can learn about real banking, not just sales.

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