On 1 October 2006 a change came into effect regarding the way cheques made payable to a bank or building society need to be written. Extra information should be added in the payee line, such as the name or account details of the beneficiary of the cheque. Cheques that are made payable only to a bank or building society may not be accepted if they do not include this extra information.

The new arrangements are intended to make it absolutely clear who should benefit from the funds and help prevent fraudsters paying in stolen cheques. Banks and building societies hold accounts of millions of customers. If the cheque is made payable simply to "XYZ Bank/building society", there is nothing to identify which account the money is meant for.

By making a cheque payable to "XYZ Bank" and adding the "account number" or "name" it is clear whom the funds are intended for. Cheques made out to personal or business customers will be unaffected.

The industry worked closely with the Financial Services Authority, the independent body that regulates the financial services industry in the UK, on this initiative. These revised procedures have been brought in to help protect customers against fraud and is consistent with advice given in The Banking Code.

The change has come about because there have been a few instances where a cheque intended for one account has been fraudulently deposited into another. One of the contributory factors in this scam was that the cheque was made payable only to the bank or building society involved, with no account name being quoted on the cheque.  In such circumstances a cheque could be fraudulently deposited into another account at the same bank or building society. Including the name of the account to be credited as well as the name of the institution will act as a “double check” as to which account the money is genuinely destined for.

The changes to the acceptance of cheques made payable only to an institution are not the result of a change in law, however, it is a change in accepted consumer practice. As such, the changes will not appear on the statute book.