Solons want additional banking day to fund issued checks

Thursday, 05 May 2011 10:31

Lawmakers are seeking the repeal of two Circulars issued by the Bangko Sentral ng Pilipinas (BSP) which implement bank check clearing on the same day instead of three banking days.

Rep. Rufus Rodriguez (2nd District, Cagayan de Oro City) and his brother Rep. Maximo Rodriguez, Jr. (Party-list, Abante Mindanao, Inc.), authors of House Bill 4345, said BSP Circular 681 and 705 issued last January 24, 2011 or the "Revised Check Clearing and Settlement Processes," means check issuers that have insufficient funds will no longer be given a chance to fund their accounts and the banks will decide on the same day whether to return the checks or give an overdraft for valued clients. "This would be very detrimental to many issuers," Rodriguez said.

Rodriguez said according to the circular, a Check and Other Cash Item (COCI) dishonored for the reason that such is drawn against insufficient funds or credit, or is drawn against a closed account, or payment thereof has been stopped shall be returned by the drawee bank to the negotiating bank not later than 7:30AM on the clearing day immediately following the original date of presentation of the COCI.

"Because of this new circular, banks immediately return checks with insufficient funds, which means that they can immediately collect the fees they charge for returned checks," Rodriguez said.

"In some instances, banks charge a service fee of P2,000 plus a returned check fee of P200 for every P40,000 or fraction thereof of the check per day. These are onerous fees which should be regulated," Rodriguez stressed.

Rodriguez said if this Circular is not changed, clients/depositors or the check issuers will be adversely affected by this revision, which in effect will change the culture of issuing checks.

Rodriguez said there are instances when there is really no intent to defraud and sometimes the issuers absent mindedly issued the check or the fund in the account were used without the knowledge of the issuer as in instances of joint accounts.

"Issuers should be given at least one day to correct the mistake," Rodriguez said.

Rodriguez said the practice of banks before is to have bank checks for clearing settled by the BSP on the same day but the system permits deferral of settlement in the clearing balances.

"Funds only become available for use by the depositors-payees on the third banking day if the checks are issued within Metro Manila and seven banking days for out-of-town checks and check issuers are given a chance to fund insufficient accounts," Rodriguez said.

Under the measure, a Check and Other Cash Item (COCI) dishonored for the reason that such is drawn against insufficient funds or credit, shall be returned by the drawee bank to the negotiating bank not earlier than after 24 hours from the original date of presentation or 24 hours after notifying the issuer of the insufficiency of fund in order to give the issuer a chance to fund the check.

Banks and other financial institutions are hereby prohibited from charging customers a service fee for returned checks an amount more than P2,000 per check.