Back in 2006, complaints started flooding into UK banks about the practice of ‘clearance delay’. Customers cottoned onto the fact that modern electronic banking methods mean that when you lodge a cheque, the money could be moved straight into your account practically instantaneously.
So why was it taking five days for a cheque to clear? Well, banks were debiting the money as soon the cheques were lodged. They then used the money to build up interest for the best part of a week before transferring it to where it was intended to go. They were essentially stealing interest earned on money which wasn’t theirs.
It may have only been a few days, but when done with every single cheque lodged in every single bank, the figures involved were counted in the billions. Eventually, when enough people complained and the media had got a hold of the story, the UK banks began to give in.
Crumble
Lloyds TSB was the first to crumble and soon afterwards the rest of the UK’s major lenders followed suit. Clearance delay had been done away with in a number of other countries prior to the UK campaign, but its high-profile nature meant there were hopes that Irish banks might follow suit. As anyone who has lodged a cheque recently will know, for the most part, they didn’t.
The failure of the banks to amend the practice is unsurprising, in particular because there has been little by way of incentive for them to do so. They have not been confronted with the flood of complaints seen in the UK case and neither the Financial Regulator nor the Government has attempted to force them to stop stealing interest on other peoples’ money.
So, JOE.ie decided to investigate which banks are holding on your money, and which are handing it over.
As it turns out, Ulster Bank, which is a part of the UK-based RBS group, did the decent thing and extended the reduced cheque clearance time to Irish customers. In part, anyway. We put in a call to our local branch and were told that an Ulster Bank cheque would clear overnight. An AIB, Bank of Ireland or other non-Ulster Bank cheque meanwhile, would still involve a wait of four to five working days.
Permanent TSB meanwhile said it can clear your cheque instantly – if it has been issued by Permanent TSB. For all other cheques however, you’re looking at up to five working days.
Bank of Ireland meanwhile was a different story. When we put in a call to the Group’s Banking 365 we were informed that all customers are advised that it will take between three and five days for a cheque to clear – regardless of what bank the cheque comes from.
The bottom marks however, go to AIB. The troubled financial institution will take two to three days to clear one of its own cheques, four to five days to clear a cheque belonging to another bank such as Ulster Bank or Bank of Ireland and a stunning seven to 10 working days for a cheque in another currency.
Interest
This means if you have cheque in Sterling for example, you’ll need to give it the best part of two weeks before you can expect the good people at AIB to give you your money. And don’t expect any interest over that period.
Some banks have been looking at allowing customers to draw funds on a lodged cheque before it has been cleared. A number of UK have been allowing customers to draw down up to £1,000 before the cheque has been cleared. Bank of Ireland have been known to offer something similar although only if a customer requests that the clearance delay process be speeded up – and  their account has a healthy track record. If a cheque made out to your account has bounced in the past however, you can forget it.
As always, the advice is to shop around. If your bank is playing hardball, throw in the fact that Permenant TSB can clear its cheques over night and demand to know where the interest accrued after lodgment date goes. It’s your money – so you have a right to an answer.
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