Payments by cheque can be taken back from a bank account months after a bank has cleared a cheque and credited an account, according to the FSB.

Until recently it was thought that the cheque clearing cycle takes three working days and that was the end of the story.

But now banks are saying that the cheque clearing system doesn’t always clear cheques and they can never guarantee that a cheque will not be withdrawn.

The banking industry has even admitted that cheques are not a safe way of transferring funds and is urging businesses to consider alternatives.

FSB National Chairman Carol Undy said:

 "Banks are saying that they can never guarantee that they will not withdraw a cheque and that it can always be cancelled later. This places businesses in an impossible situation.  Banks are in the business of risk but it appears they are determined to shift this risk onto businesses by the back door.

 “If this really is the death of the cheque then the banks should be up front about it rather than employing such clandestine methods.  What has been revealed so far is just the tip of the iceberg, and it is an issue of such importance that we are not prepared to let it drop."

FSB member Ian Roberts, who runs an rare books business, was the first business owner to blow the whistle on this new practice.  According to Ian his bank, NatWest, used to tell customers that it could guarantee that funds would not be withdrawn after ten working days.  He said:

 “Over the summer something changed.  NatWest started to say that they could withdraw a cheque at any time.  This leaves me in an impossible situation.

 “I deal in high value antique books and need to know that I have been paid before they are despatched.  Once the cheque has been cleared and the funds have been credited to my account, they must stay cleared.  I cannot operate without that certainty and I am sure that the same applies to the four million other businesses in this country.”

Ends

Notes to Editors:

1.       The FSB is Britain's biggest business organisation with 185,000 members.  It exists to protect and promote the interests of the self employed, and all those who run their own business.  More information is at: www.fsb.org.uk.

Contacts:

FSB Chief Spokesman

Stephen Alambritis: 07788422155

FSB Press Office (ISDN available):

David Bishop:  020 7592 8113 / 07740 076848

Daniel Mazliah:  020 7592 8128 / 07717 861605