Written answers

Tuesday, 3 July 2012

Department of Finance

Banking Operations

9:00 pm

Photo of Michael McGrathMichael McGrath (Cork South Central, Fianna Fail)
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Question 205: To ask the Minister for Finance his views regarding the length of time it is taking banks to clear cheques and credit a customers account; and from the point of view of retail businesses, the length of time it is taking for credit card receipts to appear in the account of the business; and if he will make a statement on the matter. [32412/12]

Photo of Michael NoonanMichael Noonan (Limerick City, Fine Gael)
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I have been informed by the Central Bank that the clearing cycle for a cheque should be no longer than three business days, with a bar on returning a cheque unpaid being set at five business days. However it should be noted that this clearing cycle may be shorter in some circumstances (in particular, where the accounts of the payer and the payee are both held with the same branch of the same bank). As to the related matter of when a bank will permit a customer to draw against a cheque lodged to his or her account, this is a matter for decision for each bank based on its own risk management arrangements and would be outlined in the relevant terms and conditions. With regard to credit cards, a number of steps must be completed before a retailer's bank account is credited following acceptance of a payment by credit, debit or pre-paid card from a customer.

Once the card has been inserted into the point of sale (POS) terminal at the counter and verified by PIN (or in some circumstances by signature), this device transmits the card data and transaction amount to the retailer's acquirer. The acquirer routes a request for payment to the bank that issued the card to the customer and - assuming that all is in order (e.g. that the cardholder has sufficient credit, that the card has not been reported as lost or stolen etc.) - the card-issuing bank authorises the transaction and an authorisation code is sent back to the retailer via the acquirer.

Later on (the exact timing and the frequency of this step will depend on the arrangements agreed between the retailer and the acquirer), the retailer will, in batch process capture and transmit the data relating to all authorised card transactions in a given period to the acquirer. The acquirer will process these transactions via the relevant card scheme (e.g. VISA, MasterCard) and collect the total amounts due to the retailer from all the card-issuing banks. The card issuing banks will then transfer these amounts via the card schemes to the acquirer who will, in turn, pay these on to the retailer's bank. That bank then credits the retailer's account to complete the process. Value is normally given to the retailer on a 'next day' basis following completion of the batch transaction processing.

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