Tuesday, 19 December 2017

Buying a car...

It is a while since I last bought a car - it was for my wife, and was a simple matter of using a debit card in the car dealership. Those were the days when Barclays were not quite such a total pain in the arse. Personally, I have a bicycle, but even that is hardly used these days - being a hermit is cheaper.

This time it is for my son. I am in a better position to secure finance, and so have done that and now need to pay for the car he wants so he can go collect it. Yes, OK, I am a sucker for lending my kids money and I really really should not do it, you can say "I told you so" in due course, or maybe not. I gave the kids some money for Christmas though, so gave him the deposit :-)

I naturally expect Barclays to be a problem, so I checked with Starling Bank and they said no issue with paying on the card - they don't have limits. Cool. I may as well try them out as my latest bank account.

I tried to put the money on the card using faster payments, and had the fiasco with Barclays as per previous blog.

Now, a lot of people don't quite know how these systems work. The main two systems you encounter in personal banking are Faster Payments and BACS.

Faster Payments

This is a system to send money between banks that is near instant and irrevocable as cleared funds. This is important as it provides certainty. If you pay someone using faster payments, they have the money, for sure. You cannot claw it back once you walk away. The system itself has a limit of £250,000 now, but banks have individual limitations. More...

To buy a car, using a card is simple, but could possibly be clawed back if there is a claim of fraud. Faster payments are irrevocable which makes them ideal for this.

This is possibly why the car dealer said they won't take a card, which is a pain.

BACS

The older system is 2 day BACS. This is, however, still used a lot. A lot of companies use it (we do) and it is used for Direct Debits. It has limits around the £20,000,000 mark.

It used to be that when you sent money, it would vanish on Monday and arrive on Wednesday. In fact, what happens, is there is a 2 day process (which, once upon a time, actually used magnetic tapes and mainframes to sort the data, hence "sort-code"). The money actually leaves and arrives on the same banking day, i.e. Wednesday if requested Monday. Banks took it on Monday to ensure it was still there on Wednesday, and to keep some interest, etc.

A company with access to BACS can submit a BACS file. We (A&A) can do this, and use it for Direct Debit collections and payments we make. The nice thing is that in the one file we can Direct Debit from bank A to our account, and also Direct Credit from our account to bank B and it all happen on the same day with no messing about. BACS really "just works".

There is another system which is not so useful now called CHAPS, which takes a couple of hours typically. It used to be one of the only ways to move large amounts same day, apart from cash! Actually, given the amount, cash would have been amusing, but I bet they don't take that either!

So what did I do?

I used BACS to DD my Barclays account and credit the Sterling card. Two days notice, but works with no questions and no hassle and no blocking of on-line banking. Very cool.

This is using A&A to do it, but it does not cost A&A, and I'd be happy to do the same for any staff. It is just a means to remove the hassle, but at the penalty of two days notice, and it is not like there is not a proper audit trail.

How do I pay the car dealer?

The problem is that the money is now in Starling, and the car dealer won't actually take a card (arg!). So I need to fast payment from Starling.

Now, this is where Starling are showing they are a lot less hassle than Barclays, but not totally without hassle.

Issue 1: There is a £10,000 limit on outgoing fast payments, and the car is more than that (it is more than Barclays limit too).

Solved, they were happy to explain on the in-app chat that they do larger amounts, just not from the app payment page, I have to go through the details in the chat. Only extra information needed is "reason for payment" - well, actually the clue is the name of the payee XXX Motors Ltd, it's for a "car" - well, that or "a new hat".

Issue 2: Having chatted at length yesterday, we now have the exact amount, and I said what I wanted to do. They were happy to do it, but new catch that was not mentioned before - they will only do larger fast payments 9am to 4pm. I wish they would have told me!

However, looks like it all happening, and my son can get his car this week, at last. Apparently this means I have a chauffeur for the next decade or so as well :-) As I said, it is a good job I was not sat in a car dealer waiting for the money to transfer!

So, yes, minor annoyance Starling, but way better than Barclays so far, well done.

I'll update if more problems :-)

Update: Seems more like "slower payments" at the moment...
Update: 11:17 they eventually call to verify more details!
Update: 12:03 they move money to a different account ready to send
Update: 12:15 finally sent

At the end of the day...

All I want is a bank that does what I ask them to. I understand that they need to validate that I am me in a way they are happy with (after all, if they are fooled, it is they that have been defrauded), and then just do what I ask without any messing about. Simples.

P.S. To reiterate a tip here - always send a small amount to the payee you have set up and confirm it arrives. We did this. That helps ensure no mistakes.

P.P.S. Someone tweeted that Faster Payments are not quite 100% guaranteed as they are a "Net Settlement" between banks at the end of the day, and only CHAPS is 100% guaranteed. He felt that the faster payment could be reversed if not settled. This basically would only happen if a bank went bust. That said, I am not convinced - I would see that as the banks owing each other money and not settling and not a per account thing as it is a "net" settlement. I mean, which faster payments would be "reversed" in such a case even? I don't know legally what would happen in such a case, and not even sure anyone knows, but the statement on the faster payments web site is that they cannot be reversed, which would be a good argument if your bank did reverse it, I am sure. It is interesting. It is also worth pointing out that even is someone sends you money by CHAPS, if your bank then goes bust (the level of "unlikely" he was discussing) then your CHAPS payment may be worthless even if not technically "reversed". Having money in a bank at all is that level of risk regardless of payment method. Faster payments cannot be reversed on a whim, and barring something of the level of a bank going bust, they are secure, as I understand it.

23 comments:

  1. Seriously, I would think you are in a position in your finances and life where you need private banking. I have paid for a £46k car on my debit card. No issues. Just tipped off my bank manager the day before what I was going to do. Last year I paid £60k for a car. Again, tipped off my bank manager and the payment went straight through. Loved the expression of the car salesman's face.

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    1. I think RevK is saying the dealer was refusing to take debit card payments because they can be clawed back and aren't irrevocable cleared funds unlike CHAPS or faster payment (or cash); that isn't going to change regardless of if you have private banking or not; it might just stop it being referred at the point of sale and allow it to do an online authorisation... but that doesn't change the card issuers scheme rules around chargebacks etc.

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  2. Isn’t abusing the business banking facilities to debit one account and credit another a form of money laundering?

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    1. Not abuse, BACS is there to move money.

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    2. Also, I am no expert on money laundering, obviously, but surely the point is to somehow make the money you have legitimate. Moving money from bank A to bank B and then from bank B to bank C does not do that, surely. Maybe I am missing something?

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    3. money laundering is cleaning up criminal money not simply moving money in a non trivial way. Whilst you could abuse such banking facilities to clean up money, it is not really any better than performing two transfers using online banking via a third account.

      In this case it is not money laundering since the funds are legitimate.

      see http://www.legislation.gov.uk/ukpga/2002/29/part/7 which makes various offences under the chapter called money laundering and all require criminal property.

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  3. I mean, of course you’re not money laundering - but it hides the money trail. It’s why retailers only refund to the original payment method. Also how does your accountant handle and reconcile that money moving through the business accounts? Just seems to be a messy and question-raising way to do it, even if only once or twice.

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    1. The accountant has no problem, really. Given the hassle of other means to move money, BACS makes it very easy!

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    2. And obviously there is a money trail.

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    3. I would assume that these transactions would both be posted to the directors' loan account in the company's books. No great drama there.

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  4. I think the main use of CHAPS is to generate charges that solicitors can pass on to you when you buy a house.

    They like to find extra costs to pass on!

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  5. >>>Actually, given the amount, cash would have been amusing, but I bet they don't take that either!

    It would set off money laundering alarms.

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    1. It shouldn't raise any alarms. My understanding is that banks and authorities aren't interested in checking cash movements until it exceeds GBP 125,000.

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    2. I do wonder how actual rich people cope though.

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    3. You have to be registered (probably via HMRC) under the money laundering regulations as a high value dealer to accept (or make as a trader) even relatively small cash payments and under the latest 2017 Money Laundering Regulations that has reduced from the equivalent of €15,000 to €10,000. The idea being that it catches "cash in hand" type payments to trades people where it might indicate evading tax and VAT or say your local drug dealer.

      HMRC considers a high value payment to be:
      - a single cash payment of €10,000 or more for goods
      - several cash payments for a single transaction totalling €10,000 or more, including a series of payments and payments on account
      - cash payments totalling €10,000 or more which appear to have been broken down into smaller amounts so that they come below the high value payment limit

      That is why most (now/nearly new) motor dealers are somewhat averse to taking "large" amounts of cash as they have to complete customer due diligence and at the very least record details of the transaction - that and all the cash storage and cash in transit type risks.

      The banks are generally very slick at referring payments for clearance and bulk reporting SARs to NCA; generally you'll never know why your large payment has been held for "security reasons" but there is a good chance that it may actually have gone for anti money laundering checks rather than security clearance - but they can't tell you that as that would risk tipping off which is an offence under the MLR - even to the extent that your bank account may be effectively frozen pending clearance from NCA to prevent money laundering but the law provides for "routine" payments of <£250 for things like utilities, mortgage payments to be continued so as to not arouse suspicions.

      A lot of the time this will just be a suspicious activity report that is then deemed "low value intelligence" but expect if it's a motor dealer making that SAR your registration number, address, phone number, driving licence or passport number, what you say the source of funds is, which can then be cross referenced and the database searched later and details of why it looked suspicious, were you with someone and looking coerced, uncomfortable, nervous... the banks can and do make SARs for some quite small amounts if say and vulnerable person starts making a whole series of "unusual" transactions out of keeping and it is one of the reasons why they require prior notification of not exactly large cash withdrawals rather than a lack of cash in the branch as that isn't generally "normal" behaviour people carry out - even businesses generally don't handle large amount of cash in that way and will use a cash in transit solution if they are regularly.

      NCA are currently getting about 500k SARs per year and there will (or should!) be a lot more "circumstances" that will have been internally raised by people on the front line and reviewed by an organisation's money laundering compliance officer (who is expected to be competent) to make judgement on if SAR needs to be made to NCA or if they are happy that with the details provided and then that report and their judgement then just remains internally recorded. Even asking to pay a large amount cash as first preference for payment might be "suspicious" activity even if they payment if then made another way...

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    4. Most of my clients are "rich people" by most people's definition. I see how it works from their perspective. Getting out GBP 5,000 cash for a week away is just routine. Wiring (via some electronic means) GBP 100k is no great concern.

      As for how the money Adrian moved through A&A for convenience, I am not an account and I do not claim to be. But I had a little basic training in accountancy and double-entry book keeping and I do all my own business accounts and my accountant never ever queries how I have treated any transaction in the books.

      I believe the correct treatment of the GBP 10,000 (?) that he moved out/in or in/out of the business is as follows.

      He moved GBP 10k from his personal bank account to a company bank account. It was then shown in his Director's Current Account on the company accounting system as a debt owed by the company to him personally.

      2 minutes later he moved GBP 10k from the company to the final destination (the car dealer) and it was then debited from his Director's Current Account at the company.

      The two transactions wipe out each other.

      Both transactions occured on Balance Sheet accounts and not on Profit & Loss Accounts and hence there is no Profit, nor Loss, occurring and both transactions have netted off to Zero on the Balance Sheet.

      The only argument might be that the company has taken some kind of hit or loss if the company has incurred some banking fee, let's say 50p, per transaction. Officially that 50p x 2 transations should be debited to Adrian's Director's Current Account with the company. In reality I would ignore it. It's trivial.

      Of course, if he had done the transactions as CHAPS and incurred £40 of fees charged to the company then the £40 is non-trivial and should be debited not to the Banking Fees account on the P&L but instead to the Director's Current Account on the Balance Sheet.

      I don't think an accountant would have an issue with any of this as long it happens once or twice a year and not daily. If it were happening daily then I suspect there would be an argument that the company's core business activity is no longer Technology but is now Financial Services.

      I have run balances both positive and negative on my Director's Current Account and, at times, on the advice of my accountant.

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    5. If all this is true then a lot has changed. Checking my diary I joined a client on a roughly-20-seater private jet departing Farnborough Airfield in 2008. As we were about to board the aircraft the customs official asked if any of us was carrying cash (or cash equivalents, such as bearer-bonds) exceeding GBP 125,000. We all called out "no" and he was happy. We boarded and took off.

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    6. Indeed, basically that, though in this case the transactions were at the same time, not even 2 minutes apart, and the company has no transaction cost / bank charges for these types of transaction so not even a trivial benefit in kind there.

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  6. >>>The car is not that much!!!

    I work for a car insurer... I once had a customer try to tell me his £60k car was not that much, and objected to the need to have a tracker installed as a result...

    But even a few grand would be helpful in "placement". Buy car in cash, sell car for BACS payment or Cheque, begin layering.

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  7. Last time I bought a car this was all so much hassle I ended up paying by banker's draft. A small cost to get one, but no arguing about it.

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  8. The best online/mobile banking app I've used - by far - is Coutts.

    Sure they're stuck in the dark ages in lots of respects (they insist on a wet ink signature on a request to change your postal address, for example, and I doubt very much there's any API provision whatsoever on their personal banking products) but in terms of simply being able to perform any kind of transaction, of any size, in any currency, from your iPhone, inside 2 minutes, without any fuss or faff, they're second to none.

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  9. "P.S. To reiterate a tip here - always send a small amount to the payee you have set up and confirm it arrives. We did this. That helps ensure no mistakes."

    Warning - doing this seems to trigger the fraud systems on Lloyds/TSB banks. Happened a couple of times with me. I guess some fraudsters try a small sum first and if it goes through they do a larger sum.

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