FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

introduced by Representative Rufus 8. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No. 4345
EXPLANATORY NOTE

Previously, the practice of banks is to have bank checks for clearing settled by
the BSP on the same day but the system permits deferral of settlement in the
clearing balances. Funds only become available for use by the depositors-payees on
the third banking day if the checks are issued within Metro Manila and seven banking
days for out-of-town checks and check issuers are given a chance to fund insufficient
accounts.

However, with the effectivity of BSP Circular 681 and 705 last January 24,
2011, banks check clearing will be implemented same-day instead of three, which
means check issuers that have insufficient funds will no fonger be given a chance to
fund their accounts and the banks will decide on the same day whether to return the
checks or give an overdraft for valued clients.

According to the circular, “A Check and Other Cash Item (COC!) dishonored
for the reason that such is drawn against insufficient funds or credit, or is drawn
against a closed account, or payment thereof has been stopped shall be returned by
the drawee bank to the negotiating bank not later than 7:30 AM on the clearing day
immediately following the original date of presentation of the COCI’.

With this, the clients/depositors or the check issuers will be adversely affected
by this revision, which In effect will change the culture of issuing checks.


Also, because of this new circular, banks immediately return checks with
insufficient funds, which means that they can immediately collect the fees they
charge for returned checks. In some instances, banks charge a service fee of P2,000
plus a returned check fee of P200 for every P40,000 or fraction thereof of the check
per day. These are onerous fess which should be regulated.

it would be very detrimental to many issuers if this Circular is not changed
because there are instances when there is really no intent to defraud and the issuers
absent mindedly issued the check or the fund in the account were used without the
knowledge of the issuer as in instances of joint accounts. Issuers should be given at
least one day to correct the mistake.

ttis in this light that the immediate passage of this bill is earnestly sought.

RUFUS B. ROD!

j
’

unemol Conover JR.


FIFTEENTH CONGRESS )
REPUBLIC OF THE PHILIPPINES )
First Regular Session )

HOUSE OF REPRESENTATIVES

Introduced by Representative Rufus B. Rodriguez and
Representative Maximo B. Rodriguez, Jr.

House Bill No. 4345

AN ACT
PROVIDING ISSUERS OF BANK CHECKS AN ADDITIONAL DAY TO FUND
CHECKS ISSUED BEFORE BEING PENALIZED BY THE BANKS AND FIXNG
THE AMOUNT OF PENALT THAT BANKS CAN CHARGE.

Be it enacted by the Senate and the House of Representatives of the Philippines in
Congress Assembled:

SECTION 1. A Check and Other Cash Item (COCI) dishonored for the reason that
such is drawn against insufficient funds or credit, shail be returned by the drawee
bank to the negotiating bank not earlier than after 24 hours from the original date of
presentation or 24 hours after notifying the issuer of the insufficiency of fund in order
to give the issuer a chance to fund the check.

SEC. 2. Banks and other financial institutions are hereby prohibited from charging
customers a service fee for retumed checks an amount more than Two Thousnad
Pesos (P2,000) per check.

SEC. 3. Separability Clause. If any clause, provision, paragraph or part hereof shall
be declared unconstitutional or invalid, such judgment shall not affect, invalidate or
impair any other part hereof, but such judgment shall be merely confined to the
clause, provision, paragraph or part directly involved in the controversy in which such
judgment has been rendered.

SEC. 4. Repealing Clause. BSP Circular No. 681 and 705 are hereby repealed
accordingly. All other laws, executive orders, rules and regulations or parts thereof in
conflict with the provisions of this Act are hereby repealed or amended accordingly.

SEC. 5. Effectivity. This Act shall take effect after fifteen (15) days following its full
and complete publication in the Official Gazette or in two (2) newspapers of general
circulation.

Approved.