If I needed to borrow a small amount of money and I had a cheque book
and a cheque guarantee card, I could go to a cheque cashing shop and
get a loan to the extent of the guarantee which can be up to £250. The
cheque cashing shop insists that I don't put a date on my cheque and
they will insert a date before they present the cheque to my bank. If
I am unable to repay the loan after, say, the agreed period, the
cheque cashing shop will extend the loan at a suitable usurious rate
of interest. The cheque can, in practice, be presented many months
after receipt by the cheque cashing shop.

This has happened to a friend of mine and she currently owes the
cheque cashing service £250 plus interest plus interest on interest.

She intends to pull the plug on the transaction and let the cheque
cashing service sue for their money but in the words of Lord Dunpark,
that eminent Scottish judge, "they cannot get blood from a stone".

What she doesn't want to happen is that the guarantee kicks in and she
goes overdrawn and the meagre state benefits paid into her account are
used up for the benefit of the bank.

She cites the APACS UK Domestic Cheque Guarantee Card Scheme.
http://www.apacs.org.uk/payment_opti...c_cards_7.html


Under the rules (Rule 2) the cheque must be dated on the actual date
of issue and under Rule 6c the cheque must be presented within 3 days
of issue else the guarantee is null and void.

If she can show evidence as to when the cheque was issued in the first
place, is the guarantee worthless and is her bank likely to
acknowledge this?

I'm not suggesting my friend acted with moral rectitude but I'm
interested in only the legal position. Cheque cashing services may
have to rethink their practices.

--
Alasdair.

Alasdair wrote:

Under the rules (Rule 2) the cheque must be dated on the actual date
of issue and under Rule 6c the cheque must be presented within 3 days
of issue else the guarantee is null and void.

So it would seem.

If she can show evidence as to when the cheque was issued in the first
place, is the guarantee worthless and is her bank likely to
acknowledge this?

That depends on how "issued" is defined. It could be argued that by
giving them an undated cheque, she has not actually issued it yet, but
has authorised them to issue the cheque on her behalf at a future date.

On the other hand, this argument seems to be defeated by Rule 6 (which
is directed specifically at encashment service providers) because it
says the cheque must be presented within 3 days of when they *received*
it. Even if they could argue that "issue" was delayed, they would still
have received it well before it was issued. Again there is a grey area
because Rule 6 applies "where a guarantee is used to support an encashment
service". Strictly, in your scenario, your friend availed herself of a
loan service, not an encashment service, and so it could be argued that
rule 6 does not apply.

This seems to be a pretty stupid way of borrowing a small amount of money.
You mention that these shops apply usurious rates of interest. Surely her
bank's overdraft rates are less usurious than the shop's, so why not just
get the money from the bank? -- Or was there never any intention to pay
it back? :-)

Alasdair wrote:
If I needed to borrow a small amount of money and I had a cheque book
and a cheque guarantee card, I could go to a cheque cashing shop and
get a loan to the extent of the guarantee which can be up to £250. The
cheque cashing shop insists that I don't put a date on my cheque and
they will insert a date before they present the cheque to my bank. If
I am unable to repay the loan after, say, the agreed period, the
cheque cashing shop will extend the loan at a suitable usurious rate
of interest. The cheque can, in practice, be presented many months
after receipt by the cheque cashing shop.

This has happened to a friend of mine and she currently owes the
cheque cashing service £250 plus interest plus interest on interest.

She intends to pull the plug on the transaction and let the cheque
cashing service sue for their money but in the words of Lord Dunpark,
that eminent Scottish judge, "they cannot get blood from a stone".

What she doesn't want to happen is that the guarantee kicks in and she
goes overdrawn and the meagre state benefits paid into her account are
used up for the benefit of the bank.

She cites the APACS UK Domestic Cheque Guarantee Card Scheme.
http://www.apacs.org.uk/payment_opti...c_cards_7.html


Under the rules (Rule 2) the cheque must be dated on the actual date
of issue and under Rule 6c the cheque must be presented within 3 days
of issue else the guarantee is null and void.

If she can show evidence as to when the cheque was issued in the first
place, is the guarantee worthless and is her bank likely to
acknowledge this?

Seems to me that you would be in breach of contract with the bank for
entering into the arrangement. I would expect them to cancel the
guarantee card, and they might well terminate your account.

You would still owe the cheque cashing shop and they would either
continue to compound the interest, or would start the process which
would eventually send in the bailiffs. If as a result, they ceased to
be able to pay in cheques to the bank, they might be even more intent on
making an example of you (unless the problem was a rogue local manager.

Issuing a cheque using the card, under the belief that the guarantee was
void might be considered fraud.

David Woolley wrote:

Alasdair wrote:

Under the rules (Rule 2) the cheque must be dated on the actual date
of issue and under Rule 6c the cheque must be presented within 3 days
of issue else the guarantee is null and void.

If she can show evidence as to when the cheque was issued in the first
place, is the guarantee worthless and is her bank likely to
acknowledge this?

Seems to me that you would be in breach of contract with the bank for
entering into the arrangement.

Why? Do the terms generally forbid the giving of undated cheques?

I would expect them to cancel the
guarantee card, and they might well terminate your account.

Indeed they might. They probably have the right to do so even in
the absence of breach.

You would still owe the cheque cashing shop and they would either
continue to compound the interest, or would start the process which
would eventually send in the bailiffs. If as a result, they ceased to
be able to pay in cheques to the bank, they might be even more intent on
making an example of you (unless the problem was a rogue local manager.

Either the guarantee will be honoured or it will not. If not, she will
indeed still owe the shop at least what she borrowed plus reasonable
interest (she might not owe unreasonable interest if usurious). But if
the guarantee is honoured, her debt will be to the bank, and only to the
bank unless the debt to the shop exceeds the value of the cheque.

Issuing a cheque using the card, under the belief that the guarantee was
void might be considered fraud.

Nah. Fraud would be taking the loan with the intention of not repaying it.
The method by which the non-repayment is to be achieved is neither here
nor there. The intention not to repay might in any case not have existed
at the outset, but arisen later. It might then not be fraud if there are
circumstances at play beyond the borrower's control.

If she is unwilling to repay (for whatever reason, such as being unable),
she would do well to consider which of the loan shark and the bank would
make the more civilised creditor. :-)

It is not clear whether the bank has discretion to honour the guarantee
even in the event of a technical irregularity with the date. It may not
be up to the customer. She could try putting a stop on the cheque, ahile
admitting that a guarantee card was involved but pointing out hat the
provisos were not observed, and see what they say, but the bank will not
take kindly to being used as an unwitting accomplice to defrauding the shop.

Ronald Raygun wrote:


Why? Do the terms generally forbid the giving of undated cheques?

I think you are talking about the difference between what is legal what
is not proveably illegal. It was already stated that guaranteed cheques
shouldn't be undated. If someone provides both an undated cheque, and a
guarantee card, it seems to me that they intend to breach that condition.

Nah. Fraud would be taking the loan with the intention of not repaying it.
The method by which the non-repayment is to be achieved is neither here
nor there. The intention not to repay might in any case not have existed
at the outset, but arisen later. It might then not be fraud if there are
circumstances at play beyond the borrower's control.

The scenario I envisaged was that they went out of their way to record
the breach of the guarantee rules, to give them the option of voiding
the cheque. Proving that beyond reasonable doubt might be difficult,
but the bare facts might blight future credit checks.

If she is unwilling to repay (for whatever reason, such as being unable),
she would do well to consider which of the loan shark and the bank would
make the more civilised creditor. :-)

My thought, although this is presumably a licensed company, not someone
on the doorstep, or in the pub.


It is not clear whether the bank has discretion to honour the guarantee
even in the event of a technical irregularity with the date. It may not

Normally they would have discretion to honour it as though it weren't
guaranteed and generally businesses always draft contracts to give
themselves discretion, but absolutely bind the consumer.

be up to the customer. She could try putting a stop on the cheque, ahile
admitting that a guarantee card was involved but pointing out hat the
provisos were not observed, and see what they say, but the bank will not
take kindly to being used as an unwitting accomplice to defrauding the shop.

My guess is it would depend on whether they thought that they would get
their money back, with profit, eventually. If they didn't honour it, in
those circumstances, I would think it very likely they would close the
account, noting the breach in their credit history.

David Woolley wrote:

Ronald Raygun wrote:

Why? Do the terms generally forbid the giving of undated cheques?

I think you are talking about the difference between what is legal what
is not proveably illegal. It was already stated that guaranteed cheques
shouldn't be undated.

I don't think that was stated, at least not in the sense that the bank
would require its customer to date the cheque. The guarantee is a benefit
to the payee, not to the drawer (except indirectly where a payee will not
accept payment by unguaranteed cheque), and that benefit is conditional
upon a number of technicalities being observed, one of which being that
the cheque should be dated when issued.

Thus a payee wishing to enjoy the benefit of the guarantee has the right
to insist that the drawer date the cheque properly. But in this special
situation the loan shop (the real villain of this piece) is specifically
insisting that the drawer *not* date the cheque, so that the shop can
pretend to the bank that the cheque was issued much later than in fact
it was. Remember that the purpose of the cheque here is to serve as
security for a cash loan, and the expectation is that the loan will be
repaid in cash, and the cheque will then be returned to the borrower
and torn up. The shop only ever intends to present the cheque to the
borrower's bank in the event that she fails to repay the loan when due.
This would usually be weeks later.

If someone provides both an undated cheque, and a
guarantee card, it seems to me that they intend to breach that condition.

Not at all. If the drawer *were* to date the cheque properly, the shop
would be unable to store it for delayed presentation, since this would
also void the guarantee.

By requiring the date to be left blank, the shop is deliberately placing
itself at risk of the guarantee being voided, and so it should not be
surprised at all to find a customer willing to put this to the test.

There is a legal question over the meaning of "issued". When is a cheque
issued? I'd expect the answer to be when it is completed by the drawer.
In the normal case, a payee will receive a cheque only after it has been
issued. What the shop wants to achieve here, is to be able to claim that
it received it before it was issued, i.e. it needs to argue that it can
act as proxy for the drawer to finish or complete the issuing process by
filling in the date. It needs to be authorised by the drawer to do this.
I dare say this setup is possible in law, but it is undoubtedly contrary
at least to the spirit of the rules of the guarantee.

It is not clear whether the bank has discretion to honour the guarantee
even in the event of a technical irregularity with the date. It may not

Normally they would have discretion to honour it as though it weren't
guaranteed and generally businesses always draft contracts to give
themselves discretion, but absolutely bind the consumer.

Fair enough, but the background suggests that circumstances are such
that -but for the guarantee- the bank would probably have exercised the
discretion to bounce the cheque, since -reading between the lines- not
doing so would make the account overdrawn, if it isn't already.