East End MLA Arden McLean used the debate of amendments to the Bills of Exchange Law on Tuesday to criticise the fees commonly charged by banks for handling cheques.
McLean said there “appears to be collusion” of Cayman’s retail banks when it comes to the fees involving the presentation of cheques. He argued that banks have “no authority to do that” and were in violation of the law.
He claimed that the law was very specific, in that banks would have to pay the face value of the cheque to the payee and were not allowed to deduct a fee.
Especially, if the cheque were presented to the cheque-issuing bank, there was no reason for a fee, McLean said.
“It is their client and they have all the information,” he said.
If banks charge a fee, it should be based on an agreement with their customer, who is writing the cheque, and not the recipient, he added.
McLean cited two recent incidents when he was charged $5 and $10 for cashing a cheque.
The fee may be nominal for one cheque, but for workers on a minimum wage who get paid by cheque every other week, the amount would add up and have a significant impact, he said.
The East End MLA asked government to warn the banks that they are in contravention of the law and that there should be the possibility of prosecution unless they resolve the issue.
The Cayman Islands Bankers Association did not comment on the allegations, stating that it was a commercial decision by member banks whether and how much to charge for processing cheques.
The Cayman Islands Monetary Authority does not appear to see an issue with banking fees for cheque handling.
The banking regulator publishes a schedule of the fees charged by local retail banks on its website to help the public compare the costs involved in banking transactions.
According to the latest fee schedule released in February 2019, retail banks charge up to $3 for cheque cashing and up to $5 for local cheque deposits depending on the bank and the type of account. However, several banks do not charge a fee at all.
Local bank drafts cost between $5 and $10, depending on the bank. Drafts are different from cheques, because they are prepaid and guaranteed by the bank. Unlike cheques, they cannot bounce. Cheques are created by an account holder and drawn against a bank account and, therefore, take longer to process.
Government is proposing to amend the Bills of Exchange Law to allow banks to accept the digital image of a cheque to facilitate electronic clearing.
Currently, cheques must be physically delivered to a bank. This process significantly delays the transfer of funds if two banks are involved.