Increased protection of individual customers using checks:Beginning today, banks will issue to their customers checks with limited negotiability, unless the customer specifically requests otherwise

27.09.2011
 
Increased protection of individual customers using checks:Beginning today, banks will issue to their customers checks with limited negotiability, unless the customer specifically requests otherwise
 
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The concern of financial harm to customers using checks with unlimited negotiability, and the need to protect them, has led to a change in the Banking Law (Service to Customer). In accordance with the amendment to the law, changes were made in the Supervisor of Banks' Proper Conduct of Banking Business Regulation 431, under which the default format for issuing checks will change. Checks issued to bank customers will be checks that have wording printed on them which prohibits their transfer, and no change will be allowed in them (excluding date or amount), unless the customer requests in advance to receive checks whose transfer is not limited.
The changes noted, which apply only to individual customers (not firms or corporations), will lead to fewer individual customers being exposed to risks stemming from the transfer of the check. This is because when the check bears wording which indicates the drawer's intention to limit its transferability, such as the words "to payee only", the check is not transferable to a third party, and only the payee listed on the check can deposit the check. The initiative to amend the law, which will go into effect on October 1, 2011, was led by Member of Knesset Fania Kirshenbaum.
The Banking Supervision Department suggests taking several cautionary steps in writing and receiving checks. These include:
1. Filling in all check details – Every detail is important. Careless filling in of the details is liable to make it easier to forge the check or to make unauthorized changes in it. In addition, careless or erroneous filling in of the details can lead to the check being returned by the bank, and as a result cause unpleasantness and even a fee charged to the account.
2. Filling in the check stub which remains with the customer – The main reason for this, other than proper account management, is that if for some reason the check needs to be cancelled the customer will have all the relevant details.
3. Retaining checkbooks – Lost or stolen checkbooks, which are not cancelled immediately, are liable to serve as an opportunity for an unauthorized party to withdraw money from a customer's account.
4. It is recommended not to send checks by mail – To the extent possible, it is preferable to hand deliver checks. If checks must be sent in the mail, they should be placed in a paper which conceals the fact that there is a check in the envelope, it should be confirmed that the words "to payee only" appear on the check, and the payee should be contacted soon after to verify that he or she received the check.
5. When receiving a check as payment, it should be inspected well. It is important to remember that a check that is not filled in properly can create a problem when depositing it. An unsigned check will not be honored. The date, too, is important: a check cannot be deposited before the date written on it, and if more than half a year has passed since the date recorded, the bank does not have to accept it.
The Banking Supervision Department continues to be at the public's service in any issue regarding relationships with banks and credit card companies. Additional consumer information can be found at the Bank of Israel website