Questions On Fairness Of New Cheque Charges

Press, Volume CVII, Issue 31520, 7 November 1967, Page 9

Questions On Fairness Of New Cheque Charges

A series of questions on the new system of cheque charges was asked by a Christchurch businessman, Mr C. D. Ogilvie. He said the chairman of the New Zealand Bankers’ Association (Mr J. Mowbray) had been reported as saying that the new system was equitable in that the user would be asked to pay. “I understand that 125,000,000 cheques are presented through the banking system every year.” Mr Ogilvie said. “It has been reported that 75 per cent of the private accounts, because they draw fewer than 100 cheques every six months, would pay nothing other than

their $2.60 annual service charge. Further, it is understood that at least two-thirds of all accounts are private accounts. Free Cheques “What has not been quoted is the number of private account cheques serviced by the banking system, 75 per cent of whom will be asked to pay nothing for the drawing of these cheques. Their mere mass must account for a very extensive number of cheques being cleared without charge. Would Mr Mowbray advise how many million free cheques will be drawn, and how can he substantiate his claim that the new system of suggested charges is asking ‘the user to pay'? “The Bankers’ Association theorises that the charges are more fairly split than when charged all to the drawer. If this is true, then this argument should stand up to examination. The M.E.D. presents 800 cheques on average for lodgement in any one day. Can its bank claim that 799 times 3 cents —s23.97 —is the cost of the single entry recording the lodgement of these cheques to the credit of the M.E.D. ledger card, or is it more logical to assume that the cost factor involved is 800 times more, to record the 800 entries to the debit of 800 individual bank statements? Full Charge Merited “Further, the drawer has freely decided that it is of greater convenience to him to pay by cheque than by cash, and he knows very well that it would not be in his interests not to pay the account promptly. It would be absurd, therefore, to argue that it is in the M.E.D.’s interests to receive these cheques rather than to send out collectors throughout the districts in the same manner as a newspaper roundsman. “One suspects that Mr Mowbray’s fear of the repercussions engendered should the charges for cheques be increased 400 per cent, is the only true reason for dividing the charges, and one would respect his integrity should he at last admit that the Bankers’ Association decision is merely politic and not equitable. A system which does not hide a subsidy in favour of a privileged group can be admired all the more for its rarity, for such a system is often unpalatable. "Surely the Bankers’ Association should acknowledge that the benefits that a cheque bestows on the drawer Is worthy of his bearing the full charge of services received.” Bankers’ Reply Mr R. O. Smillie, Research Director of the New Zealand Bankers’ Association, said in reply to Mr Ogilvie’s comments:— “Mr Ogilvie has misunderstood some of the statements made by bank spokesmen. Seventy-five per cent of all accounts have fewer than 100 entries per half year and this would include the great majority of private account holders. “The 100 free entries is equitable because the small account holder’s deposits back a large part of the overdraft borrowing of industry and commerce. “The three cents clearance fee paid by the receiver is to recompense the bank for collecting the proceeds of cheques such as the 800 a day paid in by M.E.D. This is a major banking operation, and M.E.D. benefits by the convenience of receiving payment by cheque rather than in cash. “The banks believe it is equitable, therefore, to make an appropriate charge for this work done for M.E.D. and other receivers of cheques,” he said.