What is “Account Payee Only”?
“Account Payee Only” is a phrase typically printed between two vertical lines in the centre of a cheque. This marking arises from the Cheque Act 1992 and imposes a restriction that makes the cheque non-transferable, meaning it can only be deposited into the bank account of the named payee. This measure is intended to enhance check security by preventing it from being endorsed and cashed or deposited by someone other than the payee.
Examples
- Payroll Cheques: An employer issues payroll cheques with “Account Payee Only” printed on them to ensure they are only deposited into the employees’ bank accounts.
- Refund Cheques: A business sends a refund cheque to a customer with “Account Payee Only” to ensure that it is deposited only into the account of the customer who is due the refund.
- Vendor Payments: Companies use cheques with “Account Payee Only” for vendor payments to prevent these cheques from being misused or deposited by unauthorized persons.
Frequently Asked Questions (FAQs)
What does “Account Payee Only” mean?
“Account Payee Only” means that the cheque can only be credited to the bank account of the payee named on the cheque. It cannot be transferred to another individual or entity.
Why do some cheques have “Account Payee Only” printed on them?
This phrase is used to provide an additional layer of security to ensure that the cheque is only deposited into the account of the intended recipient, thereby preventing fraud.
Can a bank honor a cheque marked “Account Payee Only” if it is endorsed by someone else?
In general, banks are not supposed to honor cheques marked “Account Payee Only” if endorsed by someone other than the payee. However, banks may argue they acted in good faith and without negligence if they honor such a cheque.
What is the legal basis for “Account Payee Only” in the UK?
The legal basis is provided by the Cheque Act 1992, which establishes the rules around making a cheque non-transferable with such markings.
Does “Account Payee Only” affect cheque clearance times?
No, the “Account Payee Only” marking itself does not affect the clearance time; however, it enhances security.
Are all UK cheques automatically marked “Account Payee Only”?
Most cheques in the UK are now overprinted with “Account Payee Only” or “A/C payee” to protect against unauthorized use.
Are there any other phrases similar to “Account Payee Only”?
Yes, sometimes cheques are printed with “not negotiable,” which also restricts the transferability, adding further security measures.
Can someone still endorse a cheque if it says “Account Payee Only”?
While someone could physically endorse the cheque, the endorsement is invalid under the “Account Payee Only” instruction, and banks should not accept it.
Is “Account Payee Only” applicable in other countries?
While the specific regulations and terminology may vary, many countries have similar non-transferability instructions for cheques.
Can I request a “Account Payee Only” cheque from my bank if it is not already printed?
Yes, you can request your bank to mark cheques with “Account Payee Only” if this is not their standard practice.
Related Terms
- Endorsement: The signing of the back of a cheque which authorizes it to be exchanged for cash or credited to another account.
- Not Negotiable: A term used on cheques to indicate that the cheque cannot be transferred by endorsement.
- Payee: The person or entity to whom a cheque is payable.
- Cheque Clearance: The process through which a cheque is processed and funds are transferred.
- Crossed Cheque: A cheque that has two parallel lines either vertically or diagonally printed on it, which restricts it from being immediately cashed and instead must be deposited into an account.
Online References
Suggested Books for Further Studies
- “Financial Services Law” by E.P. Ellinger, E. Lomnicka, and C. Hare: A comprehensive guide on various aspects of financial services law, including cheque regulations.
- “Handbook of UK Bank Accounting” by Steven Collings: Provides detailed insights into banking accounting practices, including the use and processing of cheques.
- “Banking and the Financial Services Act” by Michael Blair: Discusses the legal framework governing the financial services industry, including cheque handling and processing.
