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online technical resource

banking transfers, payments and cheques

overview

Consumers transfer money and make payments using a range of methods, such as:

  • standing orders and direct debits
  • continuous payment authorities
  • cheques
  • electronic transfers.

In most cases, these transfers and payments go through promptly and without any difficulty. But sometimes things go wrong. And if the consumer is unable to resolve the matter with the financial business, we can consider the complaint.

When we look at complaints about problems with transfers and payments, we look at the facts and circumstances of the individual complaint as well as taking account of other things, such as:

  • the terms and conditions of the account or contract that the consumer had with the financial business;
  • the relevant part of the financial business's internal process manual;
  • the rules of any underlying payment system used to make the payment;
  • relevant law;
  • relevant regulatory rules in place at the time the payment or transfer was made; and
  • relevant industry codes, guarantees or good practice.

This section of our website sets out the sorts of complaints we typically see involving transfers and payments - and it describes our usual approach to these complaints.

The sections on our website about disputed transactions and the quality of goods and services bought with credit may also be of interest.

standing orders and direct debits

We frequently see complaints about standing orders and direct debits that consumers have set up on their current accounts.

At first glance, standing orders and direct debits can seem like interchangeable types of payment method. And sometimes complaints can be caused in part by a misunderstanding (by either the consumer or the financial business) about the respective features of these two types of payment arrangements.

standing order

A standing order is set up by the consumer with their current account provider - and any changes to the standing order are made by the consumer direct with that current account provider.

The current account provider sends the regular payments to the party named by the consumer - until either the consumer tells it to stop or (if the consumer sets it up for only a limited period of time) the standing order instruction runs out.

If the consumer wants to change the amount of the payments made under a standing order, they must give their current account provider a new standing order - and specify that it is intended to replace the old one.

direct debit

By contrast, a direct debit is set up by a consumer with the party that will receive the direct debit payments (known as the "mandate holder" or the "originator"). The mandate holder then notifies the consumer's current account provider about the direct debit mandate - and applies for the payments as and when they fall due.

The mandate holder can also make changes to the payments that it collects under the direct debit arrangement.

Extra protection is given to consumers who agree to make payments by direct debit under the Direct Debit Guarantee - offered by all banks and building societies that accept instructions to make payments by direct debit.

Most of the complaints we see are either that the current account provider has paid a direct debit or standing order payment that it should not have - or that it has failed to make a payment that was due.

When we deal with these complaints, these are the sorts of points we usually need to consider:

  • what type of payment arrangement the consumer agreed to put in place on their account;
  • the terms and conditions of the account;
  • the current account provider's records;
  • whether the consumer or the current account provider said anything else about the payments - and if so, what that should reasonably have been taken to mean;
  • the available money (or credit facility) in the current account at the relevant time; and
  • where appropriate, the terms of the Direct Debit Guarantee.

Where we decide that the current account provider was wrong in making (or not making) a payment, we will go on to consider how that has affected the consumer.

This normally includes assessing whether the consumer has been caused loss. This could be financial loss. Or it could be non-financial loss - such as embarrassment, distress or loss of business standing. There is more information about this in the section of our website on compensation for distress, inconvenience or other non-financial loss.

In considering whether the consumer has been caused loss, we may need to ask for information about the underlying agreement between the consumer and the party that the payments were sent to (or were intended to be sent to). This could mean our asking for permission to contact that party direct.

When we consider what a fair payment would be to put things right, we normally take into account whether the loss that the consumer has suffered is, broadly, the type of loss that the current account provider might reasonably have anticipated could be caused by what happened.

Direct debit payments are dependent on the mandate holder (rather than the current account provider) applying the mandate correctly to the consumer's current account. This means we sometimes find that it is the mandate holder - rather than the current account provider - that has done the wrong thing.

Where this is the case, we will consider whether the current account provider has kept to the terms of the Direct Debit Guarantee.

Sometimes the direct debit mandate holder is also a financial business that we cover - for example, where a consumer has a direct debit from their bank current account for the monthly repayments to a personal loan from a loan company.

In this case, we can consider a complaint about whichever financial business appears to have caused the problem - which in this example could be either the bank or the loan company.

If the consumer cannot easily find out which business was probably responsible for the problem, we may need to consider a complaint about both of the financial businesses involved.

continuous payment authorities

Continuous payment authorities can only be set up on plastic cards (credit or debit cards). They are often used by consumers to pay ongoing subscription charges - such as for magazine subscriptions or to internet service providers.

Some of the complaints we see are based on misunderstandings (by either the consumer or the card issuer) about the nature of a continuous payment authority. This is sometimes made worse by confusing or wrong explanations given by the card provider in response to the consumer's complaint.

In many of the cases that we see, the consumer complains that:

  • they never gave permission for a continuous payment authority to be set up on their card;
  • they have found it difficult to stop a continuous payment authority that they had set up in the past; or
  • a payment has been taken under a continuous payment authority on a card account that had been closed.

When we assess whether or not the card provider has done something wrong, we will usually need to take into account, among other things:

  • the circumstances in which the continuous payment authority arrangement came to be set up on the card;
  • the effect of any relevant law or regulations (such as the Payment Services Regulations, for payments from November 2009);
  • any discussions that took place between the consumer and the card provider at the time; and
  • the terms and conditions covering the operation of the card.

Where we decide that the card provider was wrong to make a payment, we will go on to consider how that has affected the consumer. In doing this, we may also need to ask for information about the underlying agreement between the consumer and the party to which the payment was made.

Consumers are often looking to have payments they have made from their card accounts refunded. If the payment was made from a credit facility, we also normally expect the card provider to adjust the account, so that the consumer is not charged any interest on the refunded transaction.

cheques and drafts

We regularly get complaints both about cheques that consumers have paid into their own accounts and cheques that they have written themselves.

complaints about cheques that consumers pay into their accounts

The most common types of complaint we see about cheques that consumers have paid into their account are where:

  • the cheque is unexpectedly returned unpaid ("bounced"); or
  • the cheque is lost during processing.

Where a cheque that a consumer has paid into their account has been returned unpaid, the problem often arises because the consumer has already drawn money on the cheque - or perhaps released an item (such as a vehicle), expecting that the cheque had safely cleared.

The consumer's account may be taken overdrawn when the value of the returned cheque is debited, making things even more difficult.

When deciding whether or not the consumer's bank or building society is responsible for any loss in this type of complaint, we consider all the circumstances. This usually includes:

  • the circumstances in which the cheque came to be paid into the account;
  • the terms and conditions of the account;
  • the cheque-clearing cycle;
  • any communications about the cheque between the consumer and their bank or building society, before the cheque was returned unpaid; and
  • any steps the consumer took, before they discovered that the cheque had been returned unpaid.

Where the complaint is about a cheque that has been lost during processing, we look at the bank or building society's records - to see whether it caused or contributed to the loss. In some cases, we may need to ask the consumer about the underlying transaction that the cheque was written for - so that we fully understand the circumstances.

If we decide that the bank or building society was at fault in these types of complaint, we assess what effect this had on the consumer - and what a fair settlement would be to put things right. When we do this, we take account of things that the consumer and the bank or building society did (or failed to do).

Generally we aim to put the consumer's financial position back to what it would have been, if their bank or building society had handled things correctly.

complaints about cheques that consumers have written themselves

We regularly deal with complaints from consumers who are unhappy that they have written someone a cheque that their bank won't then pay. The official banking term for this is a "dishonoured" cheque - but most people describe it as a cheque that "bounces".

We also deal with complaints from consumers about banks wrongly paying out on a cheque - for example, where the consumer says they had "stopped" the cheque with their current account provider.

When we look at complaints like this, we consider a range of information which will normally include:

  • the terms and conditions covering the use of the account on which the cheque was drawn;
  • the position of the account at the time the cheque was paid in - including any overdraft facility;
  • any communications between the consumer and their current account provider about whether or not the cheque would be paid; and
  • any previous experience of similar situations on the account (lawyers and bankers sometimes call this a "course of dealing").

We often need to ask about the underlying transaction that the cheque was written for - so that we can better understand the effect of the cheque not being paid (or wrongly being paid).

Where the complaint is that the current account provider has wrongly returned the cheque unpaid, the consumer may point to loss that is not financial - such as embarrassment or loss of trust. This is more information about our approach to compensation for non-financial loss in the section on our website about compensation for distress, inconvenience or other non-financial loss.

Small businesses ("micro-enterprises") that complain to us about cheques that have been wrongly returned unpaid on their business account sometimes include additional aspects within their complaint - such as loss of a supplier (or of preferential terms previously given by a supplier) or loss of profit.

In this case, we are likely to need to ask for more information about how the unpaid cheque has affected the business - for example, by looking at past profit and loss figures.

Where the consumer says there were knock-on consequences, we need to assess how directly these consequences were connected with the error by the financial business.

the cheque guarantee scheme

The cheque guarantee scheme ended on 30 June 2011 - meaning that it has no longer been possible to guarantee a cheque accepted under the scheme since that date.

Under the scheme, we were able to consider complaints by consumers (including "micro-enterprises") about cheques - which they accepted under the guarantee scheme - that were not paid. The guarantee was intended to apply where the real bank customer (not a thief) wrote out the cheque.

If we were satisfied that the cheque had been accepted in good faith, that the rules of the cheque guarantee scheme had been properly observed, and that the signature was a reasonable match to the one shown on the cheque card, we could decide that it was fair for the bank to pay the cheque.

cheques that are stolen

We are also able to deal with complaints about a cheque that was meant for the consumer, but was stolen by a third party - and paid by the third party into their account with a bank of building society.

In this case, in order to bring a complaint to us, the consumer does not need to be a customer of the bank or building society that has accepted the cheque. There is more information about this on the section of our website about disputed cheque transactions.

drafts and counter cheques

A banker's draft can look, on casual inspection, like a cheque. And it is processed through the banking system in a similar way to a cheques. But it is not legally a cheque.

A banker's draft is written by the bank itself, on its own head-office account - and is made payable to whoever the customer wants. Unlike a cheque, a genuine banker's draft cannot be stopped - even if it is lost or stolen.

A building society counter cheque is written by the building society on its own local branch account - and is made payable to whoever the customer wants. A building society counter cheque can normally be stopped if it is lost or stolen.

Consumers sometimes treat these two types of payment as being as good as cash, accepting them in payment for higher-value items they are selling (such as second-hand cars) on the assumption that there is no risk of them "bouncing".

Unfortunately, stolen and counterfeit drafts and counter cheques are in circulation - and many of the complaints we see on this topic are from consumers who have accepted a draft or counter cheque which is later returned unpaid because it is fraudulent.

It can be difficult for a consumer easily to spot a fraudulent draft, because some of these fakes are very skilful. In these cases, the consumer may complain that their own bank or building society was at fault for not spotting the problem and warning them when they paid the draft into their account.

To help us decide whether we think the bank or building society was at fault in cases like this, we look into the individual circumstances involved - taking into account any contact or communication that may have taken place between the consumer and their bank or building society when the draft was paid in, or before it was drawn on.

If we decide that the bank was at fault, we consider what options the consumer would have had, if the problem had come to light earlier.

We also sometimes see complaints from consumers who have asked their banks for drafts and have subsequently lost them. The consumer asks for a refund of the money they paid for the draft, but the bank refuses (or wants to impose burdensome conditions on the refund).

When we consider a complaint like this, we will look at the terms and conditions covering the issue of the draft. We will also take account of the circumstances in which the draft was lost, to assess the likelihood of a valid claim being made on the bank by a third party in relation to the draft.

The circumstances surrounding complaints of this type tend to be very individual. We take these individual facts and circumstances into account when deciding what is fair.

foreign cheques

A "foreign" cheque can either be one that is drawn in a foreign currency or one drawn on an overseas bank. The complaints we see about foreign cheques usually involve cheques that consumers have received and paid into their bank accounts.

The complaints are often about:

  • the time taken for the consumer to get the proceeds of the cheque;
  • unexpected charges for processing the cheque:
  • unexpected charges for currency conversion; and
  • foreign cheques unexpectedly being returned unpaid.

Things are often made more difficult in these complaints by the different clearing processes that exist for foreign cheques - and the lack of certainty that the cheque has finally been paid.

Complaints that we get about foreign cheques often involve information or assurances that the consumer says they received from their bank before paying the cheque in or before drawing on it.

This means we are likely to ask for information, including any written records that the consumer and the bank may have about what was said - as well as a copy of any written document setting out the terms under which the cheque was accepted into the account.

money transfers (including e-money)

We can consider complaints about financial businesses that transfer money.

This might be a complaint about the consumer's own bank, which has agreed to send some money for them from their own account to another account within the UK. Or it might be a complaint about a payment service business that specialises in making international transfers.

The complaints we see about money transfers are usually about one or more of the following things:

  • a delay in the transfer taking place;
  • the money transferred did not reach its destination;
  • the funds were collected by someone who was not entitled to them;
  • wrong information or advice about the terms or features of the transfer, or about how to fill in transfer documentation;
  • currency conversion that was unexpected or not at the agreed rate; and
  • fees and charges that were unexpected or higher than agreed.

In all these types of complaint, we look at the agreement covering the transfer - to see what the financial business undertook to do for the consumer, and on what terms the service was provided.

We are also likely to ask the consumer and the financial business for their recollections and records of any discussions that took place about the transaction before it was made - particularly if the complaint is about wrong advice or information, or if the two sides cannot agree about what was said or agreed.

This may also be necessary where, for example, there is a dispute about what the financial business knew about the purpose of the transfer - and about the potential consequences if it did not go through as planned.

Some of the payment rules and regulations do not apply, or apply differently, where the payment was made to a country that is not a European Union (EU) member state. This means we will often need to consider the destination of the money when assessing the rights and obligations of the financial business and the consumer.

Where the complaint is that the money was delayed, did not reach its destination, or was collected by the wrong person, it will normally be necessary for us to look at the audit trail provided by the financial business for the transaction - so that we can decide for ourselves what probably happened to the money.

If we decide that the problem the consumer has complained about was caused (or was made significantly worse) by something the financial business did wrong, then we will go on to consider what loss the consumer was caused by this - and what would be fair compensation.

Sometimes we find that the problem was initially caused by something the consumer did wrong - for example, putting the wrong account number or bank code in the recipient details on the transfer request form.

In this case, we will look to see whether the financial business promptly took any reasonable steps open to it, to try to prevent or minimise loss to the consumer.

In assessing compensation, we will consider what the consumer's position would have been, if things had not gone wrong. Where the consumer says there were knock-on consequences, we need to assess how directly these consequences were connected with the error by the financial business.

For complaints brought by micro-enterprises, there may be claims for loss of profit or other loss through business disruption. In this case, we are likely to ask for more information and evidence to help us to understand its financial position before the problem with the transfer - and what effect the problem had.

electronic money (e-money)

Electronic money services (also known as e-money) are commonly used by consumers to transfer money to pay for goods bought through websites such as Ebay.

Neither the buyer nor the seller is able to see the other party's bank account or card details, as these are kept hidden by the e-money business during the transaction.

The financial businesses that provide e-money do not have to be banks. They operate payment transfer systems by providing an account for the consumer that:

  • the consumer can feed from their bank or plastic card accounts if they are paying money; and
  • can receive money paid to them by others through the e-money system.

We can look at complaints about e-money issuers from sellers as well as buyers. This includes consumers and micro-enterprises.

The complaints we see involving e-money issuers are usually about:

  • an e-money issuer reversing a payment that had been made to a consumer's account with it;
  • the quality (or non-receipt) of goods that the consumer has paid for through their account with the e-money issuer;
  • an e-money issuer restricting or closing the consumer's account with it; and
  • an e-money issuer failing to resolve a buyer/seller dispute to the consumer's satisfaction.

payment reversed by an e-money issuer

Sellers generally send goods once the e-money issuer has told them that the payment for the goods has been received into their account.

However, an e-money issuer may reverse the payment later where, for example:

  • there is an allegation that the payment had not been properly authorised by the person from whose account it had been taken; or
  • where the buyer says they have not received the goods.

We can consider whether an e-money issuer acted reasonably in reversing the payment. When we do that, the things we take into account will normally include:

  • the terms and conditions covering the consumer's e-money account;
  • whether any term covering an e-money issuer's right to reverse a payment was fairly drawn to the consumer's attention;
  • relevant evidence from the parties involved about the underlying transaction that gave rise to the payment; and
  • the history of transactions on the consumer's account with the e-money issuer.

If we decide that an e-money issuer did not act reasonably in reversing the transaction, we will normally require it to put the reversed credit back into the consumer's account with it - and pay interest, where appropriate.

the consumer says the item they bought was not as described - or was never received

We cover complaints about the e-money issuer - and not about the seller of the goods. So we cannot normally help where the consumer is simply disappointed with the item they bought through their account with the e-money issuer.

However, the terms and conditions of the account the consumer holds with the e-money issuer may entitle the consumer to a refund, if the goods they bought were not sent to them, or were significantly different from what was described by the seller.

In this case, we can consider whether or not the consumer is entitled to a refund from the e-money provider. Where the consumer says the goods were significantly different from the seller's description, we will decide for ourselves whether we agree.

This means we are likely to ask the two sides to provide any relevant evidence about the goods, as well as requiring a print-out or screen-shot of the original description that the seller posted on the website.

If we agree with the consumer, we will normally require the e-money issuer to refund the consumer's account, in accordance with the terms and conditions.

Consumers who have funded their e-money account using a credit card sometimes want to bring a complaint under section 75 of the Consumer Credit Act 1974 about the quality of goods they bought.

However, in most cases we see, the necessary "borrower-lender-supplier" chain - that must be in place for section 75 to apply - does not exist where the credit card is used to fund an e-money account, rather than to buy the goods direct.

The section on our website about goods and services bought with credit gives more information on the types of complaint we deal with involving the quality of goods.

the e-money issuer placed restrictions on the consumer's account

Most e-money accounts give the e-money issuer the right, in the terms and conditions, to restrict the use of the account in certain circumstances. An individual e-money issuer's general policies about what it will (and will not) allow accounts to be used for is not normally something we get involved in.

However, we can consider a complaint where the consumer does not agree that the e-money issuer has correctly applied the terms and conditions of the account when restricting or stopping their account.

Similarly, we can consider a complaint where the consumer says that the e-money issuer has interpreted the terms and conditions of the account wrongly or unfairly in their case.

The sorts of things we look at, when we decide a complaint like this, will include:

  • what the relevant terms and conditions say - and whether they are unclear or ambiguous;
  • what use the consumer is actually making of their e-money account;
  • how the consumer has previously used their account; and
  • where there are funds "frozen" within the consumer's e-money account, whether the e-money issuer can justify not releasing that money to the consumer.

If we uphold a complaint, we will consider what effect restricting or stopping the account had on the consumer. This might include being kept "out of money" - or non-financial loss such as inconvenience or upset. There is more information about this in the section on the website about compensation for distress, inconvenience or other non-financial loss.

Where the consumer says there were knock-on consequences, we need to assess how directly these consequences were connected with the error by the financial business.

We will take into account how long the restriction was applied for - as well as how the account was being used before it was restricted.

For complaints brought by micro-enterprises, there may be claims for loss of profit or other loss through business disruption. In this case, we are likely to ask for more information and evidence, to help us to understand its financial position before the account was restricted or stopped - and the effect this had.

the consumer is unhappy with the outcome of the e-money issuer's resolution of a buyer/seller dispute

We cover complaints about the e-money issuer - and not about the buyer or seller of the goods. So we cannot resolve disputes that have arisen between buyers and sellers who have used e-money accounts for the transaction.

However, in some cases the e-money issuer undertakes to judge disputes between buyers and sellers - as part of the operation of the e-money accounts. In this case, we can look at a complaint from a consumer about the e-money issuer's decision in their dispute.

We will look to see what the consumer was entitled to expect in these circumstances under the terms and conditions covering their e-money account - and whether the e-money issuer has applied those terms and conditions fairly (including any time limits).

help for businesses and consumer advisers

contact our technical advice desk on 020 7964 1400

This is part of our online technical resource which sets out our general approach to complaints about a wide range of financial products and issues. We would like your feedback on how helpful you found it. Please also use the feedback form below to tell us about anything you think we could clarify or explain better.

image: cheque
  • The law requires us to decide each case on the basis of our existing powers and what is fair in the circumstances of that particular case.
    We take into account the law, regulators' rules and guidance, relevant codes and good industry practice at the relevant time.
    We do not have power to make rules for financial businesses.
    Our current approach may develop in the light of circumstances disclosed by further cases we receive.
    We may decide that fairness requires a different approach in a particular case.