Don Cayo
Sun
Canada‘s establishment bankers have come up with a way for consumers and businesses to protect themselves from fraudsters who deal at Money Mart or other cheque-cashing companies that don’t belong to the Canadian Payments Association.
The problem, as regular readers will know, is that when someone cashes a legally stopped cheque at Money Mart — and this seems to happen a lot — the company often sues the issuer of the cheque, not the casher. This is true even in cases of obvious fraud, as in the frequent scenario where a scammer pretends to lose a cheque, then cashes both the original and the replacement.
As noted in previous columns, the Bills of Exchange Act, which is more than a century old, does include an arcane provision for “crossed cheques” that, in theory, offer some protection.
In law, crossing a cheque by drawing two parallel lines across the face of it means that only the recipient can cash it. In fact, this law is so little understood in Canada — though the practice is routine in places like the U.K. and Australia — that this is generally impractical. The lines are often misunderstood. They’re thought to void the cheque, not limit the cashing options so a third-party cheque-cashing company like Money Mart can’t sue the issuer if it’s rash enough to accept a properly stopped cheque.
Thus many people won’t accept such cheques, and tellers at many mainstream institutions don’t know enough to process them for payment.
In addition, the Canadian Payments Association, which represents banks, credit unions and trust companies, worries that the parallel lines could interfere with the electronic scanners that handle virtually all cheques these days. So I can see why it discourages crossed cheques, though I’d still advocate them if there weren’t a workable alternative.
Fortunately, however, there is a workable alternative.
True to its word, the CPA has taken this issue seriously since my first columns on the subject. On Thursday Roger Dowdall, the association’s vice-president of communications and education, wrote to me with a solution.
Dowdall cites a section of that same old Bills of Exchange Act that says, “When a bill (legalese for a cheque) contains words prohibiting transfer, or indicating an intention that it should not be transferable, it is valid between the parties thereto, but it is not transferable.”
He suggests writing “for deposit to the account of the named Payee only” or similar words on the face of any cheque you’re concerned about — for example, a post-dated cheque for work not done yet, or a payment to someone you don’t know very well.
“The phrase could be written on the memo line of the cheque, or at the top middle of the cheque (i.e. between the account holder’s information that is normally in the upper-left corner and the date, which is in the upper-right corner), provided that it does not interfere with any key information on the cheque, such as the name of the Payee, the amount, the date, etc.
“This wording would be clearly understood by all parties, and would therefore avoid the potential confusion resulting from crossing cheques.
“Financial institutions have reviewed this option and agree it is much more workable than crossing cheques would be.”
Dowdall’s solution is in line with what a number of readers have suggested over the months I’ve been writing about this issue. I did pass on some of those suggestions, though a bit timidly because I am neither a banker nor a lawyer and I didn’t know if any of these wordings had been legally vetted or tested in court.
I suppose a court challenge of Dowdall’s wording could still lie ahead. But if this solution is good enough for his group’s corporate members, it’s good enough for me. So that’s the wording that’ll I’ll use on the handful of cheques I write to strangers or limited acquaintances each year.
In fact, I see no reason why this phrase can’t be printed on my cheque blanks next time I pick up a new batch.
Meanwhile, there’s still every reason for MPs of every stripe to support the private member’s bill put forward two weeks ago by Vancouver East MP Libby Davies. It would put an end to Money Mart’s ability to routinely pursue people who are already victims rather than the scammers who victimized them.
While I hope and trust that businesses and consumers who see this column will take the recommended steps to protect themselves, it’s unreasonable to assume that the practice will be universally — or even widely — adopted any time soon. So Davies’s amendment will be needed for a long time to come.
© The Vancouver Sun 2008