Cheque Switch - Issue 2 - Cheque and Credit Clearing Company

CHEQUESWITCHInformation for Agency Banks about the Cheque Redirection ServiceMarch 2013 Issue 2Welcome to the second issue of Cheque Switch, the newsletter that provides Agency Banks with information about thenew Cheque Redirection Service, part of the simpler and faster Current Account Switch Service being introduced by thePayments Council in September 2013. This is a service in which all banks and building societies will play a part if theyprovide cheque clearing services for their customers.In this issue: we describe how the Cheque Redirection Service operates; answer some of your questions; and tell youwhere to find out more information.Introduction The Payments Council has committed to making current account switching easier for customers -consumers, small businesses and small charities. Simpler account switching should provide the catalyst to helpincrease competition within the UK banking sector and improve transparency for customers by removing a number ofexisting barriers. The new service is open to all banks and building societies in the UK.The new serviceThe Current Account Switch Service isbeing developed by the PaymentsCouncil on behalf of the bankingindustry. Once launched, participationwill be through direct membership ofthe Service itself, which will be run byBacs.All scheme members will have a say inthe development and managementof the service, which is different to theagency/sponsor model that is usedfor many of the UK’s existing paymentservices, such as Cheque and CreditClearing, Bacs, CHAPS and FasterPayments. The new service will providetwo options for customers who want toswitch their current account: The ‘full’ Current Account SwitchService will deliver a number ofbenefits for customers, includingthe fact that any payments (debitsand credits) accidentally sent tothe old account will be caught andforwarded to the new account fora period of 13 months. Thisincludes cheques drawn on theswitched account, and is one of anumber of benefits that will bedetailed in a Current AccountSwitch Guarantee. In addition to the full switchingservice, a ‘partial’ switch will alsobe available. With a partial switchthere is no redirection andforwarding of payments andcollections, which also means nocheque redirection.For more information about the twooptions, contact the centralprogramme team at the PaymentsCouncil at accountswitching@paymentscouncil.org.uk,and ask for a copy of the AgencyBank Fact Sheet.Delivering the new service involvesmassive systems changes bothcentrally and within individualfinancial institutions. Over the next sixmonths the central programme teamwill continue its work with the banks,building societies and paymentschemes that are involved in testingthe complex switching infrastructurethat will deliver the new service.

Do all banks have to participate in the new service?No, it is it not a requirement, but the new Current Account Switch Service isopen to all banks and building societies that operate qualifying currentaccounts, and will be the prime mechanism for transferring accounts andpayment mandates between banks.However, whether they are participating in the new service or not, all AgencyBanks will be impacted to some extent, as the UK’s payment infrastructure ischanging as a result of the service’s introduction. The changes to thecheque clearing system are described in this issue of Cheque Switch, alongwith the potential impact of these changes for Agency Banks.All Agency Banks, including those thatare not joining, will have responsibilitiesonce the new Current Account SwitchService is launched to ensure 2-4-6compliance. This is because allAgency Banks play a role in thecheque clearing as Collecting Bankswhen beneficiary customers pay‘switched account’ cheques into theiraccounts.The Cheque RedirectionService and impact onAgency BanksThe Cheque and Credit ClearingCompany (C&CCC) has developed aCheque Redirection Service inassociation with the Belfast Bankers’Clearing Company that will launch atthe same time as the new CurrentAccount Switch Service in September2013. Cheques drawn on a switchedcustomer’s old bank account followinga full switch will need to be redirectedmanually to the new bank forpayment. This applies for 13 monthsfollowing the switch. The C&CCC isamending its clearing rules andoperational processes to support theservice.If you are an Agency Bank that isgoing to join the new Current AccountSwitch Service you will need to haveprocesses in place to act as the newbank – making the pay/no paydecision on cheques drawn on aswitched customer’s old bank accountredirected to their new account atyour bank; and, as the old bank,redirecting cheques drawn by one ofyour customers who has switched theiraccount, to their account at a newbank.For more information about theCheque Redirection Service seeCheque Switch, issue 1 which can befound in the Resources/Newsletterssection atwww.chequeandcredit.co.uk.FAQs on the ChequeRedirection ServiceIf you are you an Agency Bankparticipating in the CurrentAccount Switch Service launch inSeptember 20131. What do I have to do as the ‘OldBank’?When a cheque reaches yourSettlement Member as part of theirdebit In-Clearing they will be unawarethat your customer’s account hasbeen switched from you (the OldBank) to a New Bank, so the initialpaper/process flow will be yourbusiness-as-usual process.When the cheque is presented to youfor payment you will recognise thatthe account has switched and you willreturn the item unpaid to theCollecting Bank using the new unpaidreturn reason, “account switched”.The unpaid cheque will then bereturned to the Collecting Banktogether with the sort code of the newbank and the account number of thecustomer who has switched.You should speak to your SettlementBank to find out exactly how theprocess will work for you.2. What do I have to do as the ‘NewBank’?You will need to have processes inplace even if you do not offercheques to switched customers ontheir new account. When an “accountswitched” cheque reaches yourSettlement Member via the ChequeRedirection Service it will know that it isan “account switched” chequedestined for you to make the pay/nopay decision. Your SettlementMember will ask you to make the pay/no pay decision as you wouldnormally do. There are, however,important procedural changes thatyour Settlement Member will need totell you about so that the decision ismade in the right timeframe - you willneed to ensure you maintain yourcommitment to the 2-4-6 clearingtimescales.You should speak to your SettlementMember to find out exactly how theprocess will work for you.3. What do I have to do as theCollecting Bank? Will the 2-4-6timescales be maintainedthroughout the Cheque RedirectionService?The “account switched” cheque willneed to be redirected to the NewBank for the pay/ no pay decision.The redirection process will be carriedout either by you or your SettlementMember depending on your businessas-usualprocess. The new ChequeRedirection Service has beendesigned to meet the 2-4-6 (2-6-6 for

savings accounts) timescales forinterest, withdrawal and fate. Whenthe cheque is returned “accountswitched” to you as Collecting Bankyou will need to prevent yourbeneficiary customer fromwithdrawing the funds, just as youwould have to if the cheque hadbeen returned unpaid. In this case,however, you will be need to stopand restart the ‘2-4-6 (or 2-6-6) clock’as the cheque needs to beredirected to the New Bank and it isnot possible to do this and still meetthe original timescales. You will needto tell your customer that you aredoing all this in order to keep yourcommitment to the 2-4-6 (or 2-6-6)timescales.All these requirements are set out inthe new Account Switching Rule,which you can obtain from yourSettlement Member.4. How can I find out more aboutwhat I have to do as the Old Bank,New Bank and Collecting Bank?Talk to your Settlement Member –what you have to do variesdepending on your business-as-usualarrangements.5. Do I have to test anything beforethe Cheque Redirection Servicegoes live?Yes, all participating banks, includingparticipating Agency Banks, will haveto take part in testing the newCheque Redirection Service, aprocess that starts on 8th April. Youshould talk to your SettlementMember to find out what is involved.If you are an Agency Bank notoffering the Current AccountSwitch Service1. Why do I need to get involved inthe Cheque Redirection Service?If you allow your customers to paycheques into their account with you,a cheque paid in might turn out tobe drawn on a switched account atthe Old Bank. It will be returnedunpaid to you, as the CollectingBank, marked “account switched”and will need to be redirected to theNew Bank for the pay/no paydecision.2. When do I need to be ready?There is a Live Pilot in August beforethe launch in September. You shouldbe ready for this as beneficiariesmight pay in cheques from aswitched account any day onwardsfrom when the Live Pilot starts.3. How will I know if one of mycustomers pays in a cheque drawnon a switched account into theiraccount with me?The bank on which the switchedaccount cheque is drawn (the OldBank) will return the cheque unpaidmarked “account switched” togetherwith details of the New Bank (sortcode and account number) to you.The information will be returned eitherto you or to your Settlement Member,depending on your business-as-usualarrangements for returned items.You should speak to your SettlementMember to find out exactly how theprocess will work for you.4. What do I have to do as theCollecting Bank?A cheque that has been returnedunpaid marked “account switched”will need to redirected to the NewBank for the pay/no pay decision.The redirection process will be carriedout either by you or your SettlementMember depending on your business-as-usual process.5. Is there anything else I have to do- are the 2-4-6 timescalesmaintained throughout the ChequeRedirection Service?Yes. The new Cheque RedirectionService has been designed to meetthe 2-4-6 (2-6-6) timescales forinterest, withdrawal and fate. Whenthe cheque is returned unpaidmarked “account switched” to you asthe Collecting Bank, you will need toTo find out moreprevent your beneficiary customerfrom withdrawing the funds andadvise them that the cheque hasbeen returned “account switched”. Inthis case, however, you will redirectthe cheque to the New Bank for thepay/no pay decision. You need tostop and restart the ‘2-4-6 (or 2-6-6)clock’ to protect the 2-4-6 (or 2-6-6)promise as it is not possible toredirect the cheque and still meet theoriginal timescales.All these requirements are set out inthe new Account Switching Rulewhich can be obtained from yourSettlement Member.If you are interested in joiningthe Current Account SwitchService1. If I’m not yet on board can I stilljoin and be a participant in the newCurrent Account Switch Servicewhen it launches in September?You are still able to join, but you arenow too late to be able to offer thenew Current Account Switch Servicewhen it launches in September. This isbecause of the timeframe requiredfor the work you will need toundertake to develop, test andimplement the systems andprocesses for account switching.Contact the central programmeteam at the Payments Council(contact details below), for moreinformation on joining and timings.2. If I don’t join the Current AccountSwitch Service, will customers still beable to switch their accounts to me?Customers will still be able to switchtheir account to you, but the processthat is used will not involve the newCurrent Account Switch Service.For more information covering the Cheque Redirection Service and details ofwhat is required of participating and non-participating Agency Banks, pleasecontact your sponsoring/settlement bank.For more information about the Current Account Switch Service itself, includinghow to participate in the service and the options available to Agency Banks,please contact the central programme team ataccountswitching@paymentscouncil.org.uk.