//some 3rd party need geo

Loophole in UK Banking System ?

  Wilham 21:17 02 Jan 05
Locked

My belief that once a cheque to me has been cleared it cannot be revoked has been shaken by the Daily Telegraph reply to a letter in their motoring section 18/12/2004...

A man advertises his car for £10k. A response from abroad offers the full price, and asks seller to accept £15K cheque, and after this has been cleared, to pay the agent who collects the car the £5K balance to cover shipping costs, etc.

The Telegraph reply warns the cheque will clear initially, but a loophole in the UK banking system allows it to be revoked later.

The letter and reply is the third on this D Tel list with title "Scam and more scam" ... click here

I have seen no follow up in the newspaper. Can anyone explain this loophole?

  mikef. 22:23 02 Jan 05

Becoming a well known scam, how it works is your bank credits you within a few days, however because the cheque system is a manual system when the bank then asks for the funds from the oveseas bank it is refused.

It is the old adage you don't get owt for nowt in other words if it seems to good to be true it usually is.

  Wilham 22:45 02 Jan 05

mikef,- you must be right. I am surprised the bank 'clears' the cheque before it gets the money.

I think I would have fallen for this scam.

Thanks

  t.long 23:00 02 Jan 05

The cheque does not realy clear, it just shows up as a credit on your account. You could not actaly spend it. Its one of those helpful things banks do.

  QuizMan 23:33 02 Jan 05

Technically a bank can either negotiate or collect a foreign cheque. In the former case the bank credits your account quickly, and then sets about obtaining money from the overseas bank. However, as already noted, you run the risk of spending the money before the cheque is paid and can then be debited for the amount of the unpaid cheque.
In the latter case, the bank will not credit your account until it collects the proceeds from abroad (sometimes a month or more).
The exchange rate is better for cheque collection, because negotiation is a form of lending and the "interest" is paid in the form of a worse exchange rate.
A reputable bank should give you the option of which method to use.

  Wilham 20:06 03 Jan 05

Over the years I have had several payments from abroad, and never for a moment doubted the finality of a cleared cheque. Hence my innocence with this D Telegraph report.

Thank you t.long for your sensible comment, and my gratitude goes to QuizMan for clarification and especially for your expertise with the details.

Splendid!

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