C’mon, CHAPS, let’s have the truth

Last month it was announced that the CHAPS payment system will be extended by one hour and forty minutes from summer 2016. In future, these systems will close at 18:00 for direct participants, such as the major banks.

This is because:

“The change better aligns the CHAPS settlement day with the typical business hours of many users of these systems. Direct participants are expected to pass on the full benefit of the extension to their customers by setting later cut-off times for them.”

Minouche Shafik, Deputy Governor, Markets and Banking, said: “This is a welcome step forward for the CHAPS settlement system. Extending the settlement day will provide greater flexibility to businesses and financial institutions when making decisions on funding, investment and risk management, and a longer window during which housing transactions can complete. We expect all participants to implement the change and pass on the benefit to customers.”

President of the Law Society Jonathan Smithers said: “We welcome the decision to extend the CHAPS settlement day. We believe this is a useful and positive step that increases the likelihood of transactions being completed on the agreed date, and lessens the chances of home buyers not being able to move into their new property."

On the surface, so far, so logical. But is it really a beneficial move? I asked the Bold Legal Group members for their thoughts.

For:

“I think extending the hours for chaps will be great and stop all this late receipt of funds and what happens on a Friday if funds cannot go by 3/3.30 for a client. It’s not their fault the banks do not credit/debit after this time.”

Against:

“The proposed extension of CHAPS settlement hours from around 4.20pm to 6pm for direct participants, including banks, sets alarm bells ringing.

It is likely to lead to a customer cut off time of around 4.45pm. This may assist in sending funds the day before completion, to be held to order, which is beneficial. On the downside:

• It may lead to busy firms sending funds very late in the day.
• Banks might use it as an excuse to carry out further checks!
• A problem completion might envelop the whole day, causing additional stress to all parties. I sometimes spend a great deal of time checking our client account and telephoning our bank to speed things up.
• Clients will expect solicitors and their accounts staff to be available right up to the cut off time and possibly beyond.
• The incidence of banks failing to send funds the same day may increase. On one occasion, I released funds prior to 3.30pm, but our bank did not send them out until approximately 4.30am the following morning. 

"I may be a lone voice, but I cannot help thinking that clients’ expectations, which are already unrealistic, will increase.”

“Entirely agree with the other BLG member’s comments. Current timings at least allow for a definite cut off time where alternative arrangements and temporary solutions for non-completions can be made before close of business.”

“Just don’t tell the clients about the times. They don’t know what they are now and assume that it’s until 5pm because that’s when their branch is open, so just don’t tell them anything different.  I’m sure there will be as many disadvantages as advantages to the changing times, we’ll just have to roll with it!”

“I can see Clients wanting us to be around right up to the deadline (wasn’t that going to be 6.00 pm?) – also, if the cut off is later do you think removers are going to hang around longer before they start unpacking – I doubt it."

"None of this tinkering will help – the Banks should guarantee a (say) two hour delivery of funds where we have paid for a service – not just 'same working day.'”

I am afraid, at the moment, I am in the against camp. The main reason being, as one BLG member has said, banks might use it as an excuse to carry out further checks. If they spot a name or an address they don’t like the look or sound of, they will have more time to carry out the behind the scenes security checks they feel that particular transaction warrants. Conspiracy theory believers might even think this is the real reason for the time extension!

*Rob Hailstone is founder of the Bold Legal Group

rh@boldgroup.co.uk