Repeal of BSP rule on check clearing sought

MANILA, Philippines—Two lawmakers are seeking the repeal of two Bangko Sentral ng Pilipinas (BSP) circulars that mandate bank check clearances on the same day instead of three days.

Cagayan de Oro Rep. Rufus Rodriguez and his brother, Abante Mindanao party-list Rep. Maximo Rodriguez Jr., said that BSP Circulars 681 and 705 issued on Jan. 24, 2011, and known as the Revised Check Clearing and Settlement Processes, mean that check writers who have insufficient funds would no longer have a chance to fund their accounts.

As such, it would be up to the banks whether to return the checks or issue overdrafts to valued clients.

“This would be very detrimental to many issuers,” said Rufus Rodriguez. The brothers are authors of House Bill 4345 which seeks to repeal the circulars.

Rodriguez said that based on the circulars, a Check and Other Cash Item (COCI) dishonored for insufficient funds or credit, or drawn against a closed account, or payment thereof that had been stopped, shall be returned by the drawee bank to the negotiating bank not later than 7:30 a.m. on the clearing day immediately following the 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 amount per day. These are onerous fees which should be regulated,” he said.

Rodriguez said that if the circulars were not amended, depositors and check issuers would be adversely affected, in effect changing the checking culture.

He said there were instances when there was no intent to defraud but a bank client “absentmindedly issued” a check or was unaware the account had been depleted in the case of joint accounts.

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

He said the banking practice before was to have checks cleared on the same day but the funds made available in three to seven days.