NZ Herald 20 November 2010

AFeeling better now? I do hope so.

I’ve got several responses:

• Over the years, this column has hardly been easy on banks. But I always listen to both sides, and on the recent issues the banks have usually seemed reasonable.
• There are indeed alternatives to banks, including credit unions, building societies, and mattresses.
• New Zealand is one of the least corrupt countries in the world, says recent research by Transparency International. While nobody can guarantee that regulators aren’t on the take, these things don’t stay hidden forever.
• The $8 issue — in last week’s column — was about missing a day’s interest if you transfer money after a certain time in the evening. That’s hardly trickery. It just shows that bank resources aren’t endless.
• On money being in limbo, we’ve discussed aspects of that lately, and do again below. The situation is less than perfect. But “exploitative scum”?
• Do you really think Visa should check every item sold by every merchant it deals with? Would you be prepared to pay Visa fees that covered the cost of doing that?
• The foreign currency issue does seem a bit foggy. With constantly changing exchange rates, it’s practically impossible to know if your bank is ripping you off. In the end, I hope, competition and monitoring by consumer groups and the media will work towards keeping banks honest in this area.

More broadly, banks clearly compete hard for business. And changes are afoot to make it much easier to move from one bank to another. The threat of losing customers will surely help to keep banks on their toes.

Still not good enough for you? Check out the credit unions and building societies.

AIt has, the banks tell me. “Cheque clearance used to take up to five business days in the past. Due to computerised improvements we have been able to reduce this to three business days,” says a Westpac spokesperson.

The usual cheque clearing process works as follows, according to Shaun Drylie of ASB: “A customer deposits a cheque from another bank into at an ASB branch on Monday (day one). The funds are credited to their account straight away, but they are not cleared immediately as ASB (the collecting bank) must wait for confirmation of cleared funds from the bank upon which the cheque is drawn (the paying bank).

“Cheques are collected from all bank branches each night, scanned, and then sent to the paying bank overnight through the regular inter-bank payment system. The cheque is then verified by the paying bank on Tuesday (day two).

“If the paying bank wants to dishonour payment, then it sends notice of dishonour back to ASB through the inter-bank payment overnight. This means the funds are not cleared or dishonoured until the Wednesday (day three), unless a special answer is requested by the customer banking the cheque.”

Drylie adds that if the cheque was written by another ASB customer, cleared funds would be available by the end of day 2. However, at ANZ, BNZ, Kiwibank, National and Westpac the process still normally takes three days even if the writer and recipient of the cheque both bank with them.

In all the banks, if a cheque is credited to your interest-bearing account during business hours, but hasn’t yet been cleared, you will immediately earn interest. If the cheque is later dishonoured, that interest generally won’t be taken away.

Why does the process take so long?

“The cheques cannot physically be processed in real time during the day,” says Drylie. “To put the volumes into perspective, ASB receives over 1 million cheques per month. Each night all cheques are collected from all bank branches and physically sent to the regional processing centres of the paying banks to be encoded and imaged. Once this is done the payment information is exchanged between the collecting and paying banks during the night.”

I suppose banks could hire people to enter cheques into a computer all through the day — and charge us all higher fees.

But there’s another issue here, too. People change their minds. “The payer of a cheque may dishonour or issue stop payment instructions up to the second business day after a cheque is presented for payment,” says Westpac. “Therefore, the three business days allow any potential stop payment or dishonour instructions to be received and actioned by the bank.”

As mentioned earlier, customers can also ask for a “special answer” when they deposit a cheque, to get it cleared more quickly. There is a fee for this.

Here’s what the different banks offer: ANZ: same day $25, overnight $15. ASB: same day, $25. BNZ: same day or overnight, $25 plus courier or taxi if applicable. Kiwibank: overnight, $15. National: same day $22, overnight $12. Westpac: same day or overnight, $25.

Adds Kiwibank: “Special answers can take differing lengths of time depending on how quickly they are processed by the paying bank.”

At some banks, if you want quick access to money, an electronic payment will work better — and without a fee. There are sometimes also other options, with fees. Ask your bank for details.

Another alternative is to get the payer to make out the cheque to cash — with no crossings — in which case it can normally be cashed right away.

Note, though, that cash cheques are much less secure. If you, as the payer, want to be sure the right person gets the money, you should name the payee, cross off “or bearer”, and write “not transferable” across the corner.

Getting back to the main issue, about slow cheque clearance, a Kiwibank spokesperson makes a good final point: “While some people complain about delays in clearing cheques, others complain about real time payments via the internet when they have changed their mind about a purchase or made a mistake!” For mind changers, having the time to cancel or dishonour a cheque is a big plus.

You can’t please all the people all the time.

AInland Revenue is more or less saying “mea culpa” — although a spokeswoman adds that, as of October 31, the department had processed 15,700 voluntary repayment bonus cases, involving $9.4 million. It seems you are among the unlucky ones.

“We initially hoped to process all applications by August, but should now have them finalised in December,” she says. “We acknowledge this is longer than borrowers expected and apologise to those affected by the delay. We have committed more resources to assist us to meet the December date.”

Why the delay? Apparently there was a big uptake, and quite a few people were “not up-to-date with repayments and filing of income tax returns. That work must be done before we can apply the bonus.”

The spokeswoman adds, “If interest accrued between the time a voluntary payment was made and processed, it would be reversed. In the rare case of a penalty being incurred during that period, it would also be reversed.”

You’ve still lost some interest, as you say, but hopefully you will end up well ahead by taking advantage of the bonus.

If you’re worried about your situation, email Inland Revenue by going to www.ird.govt.nz and clicking “Get it done online”. Adds the spokeswoman, “While they are there, they can also check their loan balance online to see whether their voluntary repayment bonus has been applied.”

Do let me know the final outcome.