Customer complaints see new rules on cheques delayed

Postponement will allow banks and customers more time to prepare for legislation which bans use of cheques without enhanced security features.

The postponement will allow banks and customers more time to prepare for the legislation, which bans the use of cheques without enhanced security features.

In a drive against forgery, authorities told lenders in February last year they needed to prepare to accept only cheques that were readable by machine.

The new cheques, designed with electronic bars and other security devices, are much harder to counterfeit. In addition, they can be cleared by machines much more quickly and cheaply than the manual method used for old-style cheques. The regulator had told banks to start refusing cheques without such features from January 1.

But a flood of enquiries from concerned customers about the changes prompted the regulator to put back the deadline.

"This decision has been made to help customers," said a Central Bank official involved in the reform, who asked to remain anonymous.

"Customers were saying banks were not accepting their cheques," he said.

In the UAE, the cheque remains an important method of payment, with banks in the first 10 months of last year clearing cheques valued at about Dh808 billion (US$219.9bn), according to Central Bank data. Many residents pay their rent by cheque.

A number of customers had complained to the regulator and banks after their old-style cheques were refused.

That led to the Central Bank on Tuesday issuing a circular to banks in which it referred to "problems" with the new rules.

"A revised cut-off date for handling cheques without security features will be released in the near future," the circular said. "Until then, banks should revert to accepting all cheques presented to them."

The Central Bank official said yesterday the new deadline was likely to be in the middle of the year.

Even then, however, banks would be able to accept old-style cheques that were post-dated, provided bearers signed a statement showing they had received those cheques before a certain date, he said.

"The present system works well, but the aim is to give more confidence to customers and banks," the official said. Authorities have been increasing efforts to stamp out cheque fraud and embezzlement.

About one in 16 of all cheques issued between January and April last year bounced, data from the regulator show.

Most banks have already moved to cheque truncation - converting a cheque into an electronic format to be deposited into the paying bank.

HSBC introduced an electronic cheque-clearing system in 2007.

Lenders have also switched to issuing chequebooks compatible with the requirements of the Central Bank. Ashok Gupta, the chief executive of GCC operations at the Bank of Baroda, said: "We are already working on the electronic format and whenever the rules do come does not matter to us."

Other countries have moved towards encouraging the electronic delivery of cheques.

But progress has been patchy because of the declining importance of cheques as a payment method in recent years in favour of electronic payment systems such as credit cards.