An increase in the number of bad cheques received, often because of insufficient funds in accounts to cover them, has Cayman retailers taking a number of different steps to limit impact on their business.
Foster’s Food Fair announced last Thursday that as of 5 June, it will no longer accept cheques except for those with existing cheque courtesy cards. The supermarket chain also announced that it would no longer issue new cheque courtesy cards as of last week.
Marketing Supervisor Kevin Loughery said the decision was made mostly because of bad cheques.
‘There was a significant increase in the number of fraudulent cheques in the last little while,’ he said.
‘It was a significant enough problem that it was brought to the attention of all the management team, and it was decided to move forward [with the new policy].’
In addition to cheques received from accounts with insufficient funds – which make up a high percentage of the bad cheques – Foster’s was also receiving cheques written on stolen chequebooks.
Mr. Loughery said Foster’s will now promote and encourage the use of debit cards, and that it has recruited the help of Cayman’s banks to assist in that effort.
The use of debit cards by customers will cost Foster’s in fees, but Mr. Loughery said those fees are offset by a savings in manpower and time that is being spent in trying to collect on bad cheques.
Debit cards also offer Foster’s – and customers – more security, Mr. Loughery said.
‘An increase in the usage of debit cards will reduce the amount of cash in the till,’ he said.
Less cash in the till reduces the possibilities of cashier errors and of robberies.
Mr. Loughery said there has not been a lot of bad feedback about the decision.
‘Most people have been very good about it,’ he said. ‘They understand why we’re doing this.
‘We hope our customers see this as a positive, not a negative. We’re trying to make it safer for them.’
A.L. Thompson Home Depot has also seen an increase in bad cheques and considered whether it should continue to accept them, owner Altee Thompson said.
‘We actually had our controller do some numbers, and I decided I can’t [stop accepting cheques].’
Mr. Thompson said about 40 to 50 per cent of his total sales revenue is paid with cheques.
A.L. Thompson Home Depot takes in few cheques but of higher dollar amounts because it has bigger ticket items, Mr. Thompson said, explaining why the company has to continue accepting cheques.
Nevertheless, Mr. Thompson is concerned with the number of bad cheques it is receiving.
‘People are writing cheques without a penny in their account and they know it,’ he said. ‘It’s outright theft. It’s like stealing in front of your face.’
Although it will continue to take cheques, A.L. Thompson has instituted a more restrictive cheque-accepting policy.
‘We had to tighten up,’ Mr. Thompson said. ‘We had a staff meeting and talked about more restrictions for writing cheques.’
Mr. Thompson said he would also like to encourage the use of debit cards.
‘We love debit cards because we get the money right away and there is no risk.’
Mr. Thompson said the Government needed to make tougher laws on people who pass bad cheques.
‘We don’t have a law with any teeth,’ he said. ‘The police say it’s a civil matter between ourselves and the individual [that wrote the cheque]. And you know what lawyers cost.’
Inspector Rudolph Gordon of the Financial Crimes Unit of the Royal Cayman Islands Police Services said there are laws against writing bad cheques, but criminal intent must be present.
‘Just because you write a cheque with the wrong date, for instance, doesn’t necessarily constitute criminality,’ he said.
Inspector Gordon said the RCIP looks for certain things when it comes to possibly investigating whether a crime was committed in passing a bad cheque.
The RCIP looks at whether a person was a signatory on the account and therefore had authorisation to sign a bad cheque; whether there was sufficient funds in the account; and if there wasn’t, whether there was any arrangement with the financial institution to cover it,’ Mr. Gordon said.
‘An irregular signature; that is something we would look at. An account that was closed [before the writing of the bad check]; that is something we would look at. A cheque in a large amount is also something we’d investigate.
Mr. Gordon said the cases had to be looked at individually, and any decision to pursue an investigation would be dependent on the circumstances and to the answer to the question ‘was the person dishonest’.
If the police think there is reason to investigate further, a person who writes a bad cheque could get charged with one of several crimes, including obtaining property by deception, making a document without authorisation, or uttering a false document.
If the police do not take on the case, retailers will most likely have to eat the loss.
Some retailers, however, are fighting back.
Albert Hislop, owner of the Savannah Texaco station, displays returned cheques under glass for all his customers to see.
There are about two dozen cheques displayed now, Mr. Hislop said. The writers of the bad cheque have to pay the face value of the cheque plus $20 – the bank’s fee to Mr. Hislop – to get the cheque back.
Many, ashamed of the public display, come in and pay to get the cheque back, usually offering excuses.
Mr. Hislop, who has owned the station for nine years, says there has been an increase in number of bad cheques.
‘The month of February was particularly bad,’ he said. ‘Nearly every day I went to the post office, I had a returned cheque from the bank. Sometimes two or three.’
Mr. Hislop does not want to accept cheques, but says people often come in, get gas and then hand the attendant a cheque.
‘I try to be nice. They already got the fuel and I can’t get it back,’ he said.
But Mr. Hislop will continue displaying the bad cheques he has returned.
‘I hope every merchant does the same thing I’m doing.’
Billy Adam of Hobbies and Books also has seen an increase in bad cheques.
As a result, he makes his cheque-paying customers sign a stamp on the back of the cheque saying they will pay $50 if the cheque is returned.
‘They’re signing a contract, so it makes people think twice,’ he said.
Mr. Adam pointed out that bad cheques are increasing the costs of doing business, and in the end, it is the honest customers that have to pay higher costs.
Uncle Bills takes another approach to bad cheques. The home store has used Fidelity Bank’s Cheque Guarantee System for years.
Cheques numbers from any local bank are swiped into a reading device connected with Fidelity Bank, which keeps a database of people who write bad cheques or who have not yet cleared up a bad cheque, the bank’s Brett Hill explained.
Based on that data, the bank will either approve the cheque or not approve it.
If the cheque is approved and it ultimately bounces, Fidelity will reimburse the merchant for the face value of the cheque plus the return fee.
However, the payout is only valid on checks with insufficient funds, Mr. Hill said.
‘It doesn’t cover every instance.’
The fee for the service depends on usage, but William McTaggart of Uncle Bills said it is worth it because Uncle Bills does not have many returned cheques.
‘It’s helped us a lot, I think,’ he said. ‘Just yesterday we had a cheque turned down.’