2015 - 2016

Payment systems

Cheque

Ms G signed up with a UK-based organisation called WeRe Bank that represented itself as a “common law bank”. Ms G sent WeRe Bank a promissory note (an IOU) of £150,000 and paid membership fees of £10 a month for an account. WeRe Bank gave Ms G a cheque book and said she could write out cheques drawn against the promissory note to pay her debts.

Ms G sent a WeRe Bank cheque to her bank to pay off her credit card. The bank thought the cheque was fraudulent and declined to accept it. Ms G insisted that the bank was obliged to accept the cheque and threatened to take legal action against the bank staff she had dealt with. The bank decided to end its relationship with Ms G and gave her two weeks’ notice that it would close her accounts. Two weeks later, it wrote to Ms G to say it had withdrawn her credit card and she needed to pay the outstanding amount or it would refer the debt to an external collection agency. A month later, when Ms G had not paid off the credit card, the bank referred the debt for collection.

Ms G said the bank was legally obliged to accept the cheque. She was also unhappy the bank had ended their relationship and referred the debt for collection.

A cheque is defined as a “bill of exchange drawn on a banker” and in New Zealand the use of word “banker” is restricted to registered banks. WeRe Bank was not a registered bank in any country. As such, the “cheque” Ms G presented was not in fact a cheque because it was not “drawn on a banker”.

We found the bank was not obliged to accept a cheque in payment of a debt unless both parties agreed to that form of payment. The bank had the right to decide to end its banking relationship with Ms G and followed the correct process for doing so. When she did not clear the credit card debt, the bank was entitled to refer it to a collection agency.