The Banking Ombudsman Scheme has told government agencies and the finance sector about a complaint it investigated recently in which a New Zealander was caught out trying to use cheques from bogus UK bank ‘WeRe Bank’.

The complaint was against a New Zealand bank for refusing to honour a cheque presented by a customer wanting to use it to pay off her credit card.

“The customer was upset the bank wouldn’t honour the cheque and the relationship deteriorated to the point the bank closed the customer’s account. We were asked to look at whether the bank’s decision to refuse to bank the cheque was legal and if it could end the relationship it had with her.

“In short, our investigation revealed the ‘cheque’ was not actually a cheque because the issuing ‘bank’ was not actually a bank,” Banking Ombudsman Nicola Sladden said.

WeRe Bank was set up in the United Kingdom last year as a ’common law bank’. Customers send the bank a promissory note (an IOU) of £150,000 and then pay membership fees of £10 a month for an account. It deals in its own currency called the Re, apparently a unit of energy used to pay debt.

WeRe Bank supplies the customer with a cheque book to write ‘cheques’ drawn against the promissory note to pay debts. The cheques are not legal tender so debts aren’t paid. WeRe isn’t a registered bank or even a company, but is run online by one person and with a mobile phone number.

“This is the first complaint involving a New Zealand customer that we are aware of. Canada and the United Kingdom have dealt with cases. Because WeRe cheques are worthless, customers’ attempts to repay debt with these cheques are not successful and so people face all the risks of late payment, from additional charges to repossession.

“There will be no joy for anybody who thinks they are on to a winner with a WeRe bank cheque book. It sounds too good to be true, because it is.

“We also determined the bank had the right to decide to end its banking relationship with its customer and had followed the correct process for doing so,” Ms Sladden said.