Prohibition of the use of cheques

Portugal is one of the European Union Member States where cheques are the most popular means of payment after credit cards. However, over the past few years the use of cheques has declined.
 
In order to increase confidence in the normal circulation of cheques, Decree-Law No 454/91 of 28 December (which entered into force on 28 March 1992) laid down that credit institutions must compulsorily terminate a cheque convention with defaulting entities.
 
With the aim of strengthening the effectiveness of the legal framework in force, Decree-Law No 316/97 of 19 November, amended Decree-Law No 454/91 of 28 December, increasing the responsibility of credit institutions and of the Banco de Portugal.
 
The Banco de Portugal laid down the principles to be complied with in the opening of bank deposit accounts and in the supply of cheque books, having issued guidelines for the uniform application of the above Decree-Law, through Instructions No 1/98 and No 11/05 and Notice No 1741-C/98.
 
Decree-Law No 83/2003 of 24 April added the writing of cheques after termination of a cheque convention as a reason for registration in the List of Cheque Defaulters and authorised access by credit institutions to the information on cheque defaulters, with a view to assessing the credit risk of natural and legal persons.
 
In addition to the decisions regarding the termination of cheque conventions, credit institutions must communicate to Banco de Portugal the following situations: presentation of an unpaid cheque but settled within the legal period, issue of a cheque after termination of a convention, and justified refusal to pay a cheque of an amount equal to or lower than €150, or supplied in violation of the prohibition to do so.
 
The Banco de Portugal is responsible for checking compliance with the duties assigned to the credit institutions, centralises the information compulsorily reported by credit institutions, and on the basis of this information keeps and discloses throughout the banking system a List of Cheque Defaulters.
 
The Banco de Portugal shall also decide on removals from the List of Cheque Defaulters or on the cancellation of the registration under proposal of the credit institutions or at the request of the entities in question, provided that the minimum requirements for such assessment have been met. Otherwise, cheque defaulters will remain on the said List for a period of two years, as of the date of registration, at the end of which credit institutions shall consider that they have been removed from the List.
 
Also as a preventive measure, it shall also be the Banco de Portugal responsibility to disseminate throughout the banking system the decisions, reported to it by the courts, relating to the application of additional penalties for the “crime of writing bad cheques”, in which case credit institutions shall be prohibited from supplying cheque books to the entities in question during the cheque-writing ban.
 
Cheque-related offences are punishable by court with imprisonment or a fine. However, additional penalties can be applied, such as a cheque-writing ban, and the circulation of information regarding the additional penalties applied. Sentences communicated by the Courts to the Banco de Portugal may relate to:

• Temporary cheque-writing ban / Cheque use rehabilitation
• Suspension of the right to write out cheques /  Suspension extinction
• Injunction – Probation

The validity of the judicial decisions referred to above or the permanence in the List of Cheque Defaulters do not prevent the entities in question from operating the respective deposit accounts, using other means of payment authorised by the credit institution.
 
Banco de Portugal is authorised by the Portuguese Data Protection Authority to record in a data base cheque-writing bans, observing the legal and constitutional provisions protecting the citizens. All entities wishing to consult information on their own situation recorded in those data bases must send an information request to the agency of Banco de Portugal of their residence area.   

For more information, see the Bank Customer Website and the booklet of Banco de Portugal entitled "Cheques - Restrição ao seu Uso" (Cheques – Prohibition of the use of cheques.