|Cheques: returned to drawer|
When cheque is incorrectly made out, either innocently or fraudulently, or if it is drawn on an account without sufficient funds to pay it the bank will return it to the person presenting it, having written on it the words 'return to drawer'. This has made creditors or vendors reluctant to take cheques in payment for debts due or goods sold. The reluctance has been reinforced by the traditional non-cooperation of the banks themselves in obtaining rectification of errors or in disclosing addresses of customers so that the creditor can seek redress.
The growth of credit trading and the continual escalation in the number of current accounts at banks has considerably increased the use of cheques in thc commercial world and traders stand to lose much business by not accepting them. The banks have helped somewhat by encouraging the use of cheque cards, which carry a banker's guarantee, but the position is still far from satisfactory. To facilitate the correction of innocent errors it is usual for the prayer to write his address on the back of the cheque - this enables the customer to be contacted without having to ask thc bank itself to send the cheque to him. This is no safeguard against fraud, however, and the banks will not follow up 'bad' cheques on behalf of the creditor; nor are they legally obliged to do anything apart from return the cheque to the person who paid it in. However, most banks will, on the strength of personal knowledge of their customers, represent the cheque on up to three occasions. notifying the creditor that they are so doing and asking for his authority to do so. The only redress available to the creditor, other than taking legal action for payment, is to take advantage of any untoward delay on the part of the bank in returning the cheque and then claim from that bank on the grounds of negligence. Banks make a charge to customers for any cheques paid in and subsequently dishonoured.
|Reference: The Penguin Business Dictionary, 3rd edt.|