In 1957, following the report of a Committee of inquiry an Act was passed in Britain which had the effect of abolishing the need for endorsing any cheque which is paid into the bank account of the payee. Since then banks here are being caused no little inconvenience as numbers of cheques drawn on them in favour of persons resident in the Six Counties and Britain are collected for payment by the banks there without being endorsed and the banks here are obliged to return them for endorsement. This involves work and expense.
The Irish Banks and the Association of Chambers of Commerce have asked that the advantage of the abolition of the need for endorsement should be extended to them and their customers and members. About 27½ million cheques, etc. are issued in the State annually and of these about 25 million are paid into the payees' bank accounts. The time spent by business firms in endorsing cheques and by banks in checking the endorsements and in dealing with those found to be technically irregular is, therefore, considerable and quite a substantial saving would be affected by the abolition of endorsements. The present Bill does this. In addition it makes further provisions in the law relating to cheques similar to those introduced by the British 1957 Act and thus restores uniformity in the matter with the Six Counties and Britain. This is a matter of some importance in view of the larger exchange of cheques between the two areas.
The provisions of the Bill, which protect banks paying or collecting unendorsed cheques, do not explicitly exclude cheques cashed over the counter. This would create an anomaly as it would mean that a banker who paid a wrong person on an unendorsed cheque would attract some liability whereas if he paid out in good faith on a forged signature he would be protected under the Bills of Exchange Act, 1882. I am advised, however, that the banks intend to follow the practice of the Six Counties and British banks in continuing to insist on the endorsement of cheques cashed over the counter.
Section 1 of the Bill extends to unendorsed cheques and similar instruments the protection which a paying banker at present enjoys in respect of endorsed cheques and other instruments.Similar protection is afforded to the collecting banker by section 4 (3). Section 2 preserves the existing rights of a collecting banker as a holder of a cheque in due course notwithstanding that the cheque has not been endorsed. Section 3 provides that a paid unendorsed cheque is evidence of the receipt of the sum payable by the cheque and thus will have the effect of reducing the number of cases in which drawers of cheques will require the payees to give receipts on the backs of cheques. I should stress that the section would not make a paid unendorsed cheque conclusive evidence of receipt but that it would be open to any person to put forward rebutting evidence.
Two further amendments of the law relating to cheques and similar instruments are made by the Bill. Sections 4 (1) and 4 (2) extend to uncrossed cheques and similar uncrossed instruments the protection against claims for conversion afforded to collecting banks by section 82 of the Bills of Exchange Act, 1882, as amended. At the same time Section 4 (1) (b) provides that this extended protection applies where any of the instruments in question is accepted for collection and the payee's account is immediately credited.
Section 5 consolidates the present legislation regarding the application of the provisions of the Bills of Exchange Act, 1882, relating to crossed cheques to instruments not being bills of exchange.
The consequential repeals of existing legislation are dealt with in section 6 and mentioned in the Schedule to the Bill.
In order to give banks and the business community time in which to prepare for the introduction of the new arrangements section 7 (2) provides that this Bill shall not come into operation until three months after it has been passed.