CHANGES TO CHEQUE WRITING

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.
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.

More information on how to write cheques can be found at:
http://www.bsa.org.uk/consumer/factsheets/101067.htm

or you can order a leaflet by calling the BSA's helpline on 020 7437 0655.