Modulus checking - an introduction

 

Modulus checking is a procedure for applying a mathematical algorithm to an account number (or an account number and sort code combination) to check that it is valid for a particular range of sort codes. In the absence of an entire database of every bank account, it is the next best way of checking the likely validity of an account number. In most cases modulus checking works by validating a set of numbers against a specific check digit or digits.

In the UK, there are 66 modulus checking rules published by APACS/BACS. Eiger Systems significantly exceeds this number with 115. These rules are available as tables on disk and require coding into a software application. However, these modulus rules change regularly and when rules are added or amended, corresponding changes must be applied to the application which uses them.

Although modulus checking is often promoted by the banking industry as the solution to data accuracy, it is only one aspect of validation - it does not check the actual existence of a sort code or provide any details of branch names and addresses.

If the modulus check fails, it is not necessarily the account number which is incorrect. It could be a valid account number, but the sort code has been mis-interpreted or keyed-in incorrectly. Even worse, if the sort code that is incorrectly keyed-in is outside of the validation range, the standard modulus checking rules would pass the details.

Modulus checking does not provide any indication as to whether a sort code or account number supports Direct Debits or Direct Credits.

Modulus checking does not carry out transposing of account numbers. The numerous routines for transposing non-standard accounts into standard eight digit accounts must be coded separately. Where transposing is required, modulus checking must be applied once the transposing has been completed.

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PPI victory as banks stop sales

Some of the nation's largest High Street banks have agreed to stop selling the worst type of rip-off Payment Protection Insurance in a victory for campaigners.

The City watchdog announced today that much-derided 'single premium' PPI will no longer be sold with unsecured loans from February by five banks: Alliance & Leicester, Barclays, the Co-operative Bank, Lloyds Banking Group (which includes HBOS) and RBS/Natwest.

This is Money has been campaigning against PPI for the past three years.

With single premium PPI, the cost of the insurance is taken as a lump sum and added to the cost of a loan; it attracts interest for the length of the loan term and is extremely expensive relative to the sum borrowed.

These banks will now offer 'regular premium' PPI instead, which consists of regular monthly charges for covering repayments to a loan or credit card.

The Financial Services Authority said it expects other companies selling single premium PPI to 'take note' of these developments.

Although it recognised PPI could be useful in some instances, especially in the current economic climate, it said it remains concerned over the standard of single premium sales.

Jon Pain, the FSA's managing director of retail markets, said: 'A PPI product can be helpful for customers wanting protection on a specific credit agreement, as long as the policy is sold appropriately.'

Customers being sold PPI should be told how the product works, what it covers and how much it costs. Loan approvals should not be dependent on the purchase of PPI and customers should not feel pressured into taking it out.

PPI is designed to provide a safety net in times of unemployment or illness – when a borrower may not be able to make their repayments – but it is often sold inappropriately and greatly adds to the cost of a loan.

The Financial Ombudsman said it was dealing with 500 complaints a week last year over PPI, arising from an estimated rip off of customers to the tune of £1.4bn a year.

The Competition Commission also said last year that lenders could be banned for selling PPI with loans as there is a lack of competition in the market and customers are losing out.

However, banks and insurers hit back by saying borrowers would be left vulnerable in times of economic hardship if such a drastic change was brought in.

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The Britannia Building Society is to merge with Co-operative Financial Services (CFS)

Some branches may close if they are too close to each other but the two mutuals have promised there will be no compulsory redundancies. The new business will be a subsidiary of
The Co-operative Group and Britannia members will become Co-op members.

The merger will only be possible if a new law allowing mergers between mutuals is passed in March.

The Building Societies (Funding) and Mutual Societies (Transfers) Act, known as the Butterfill Bill after its sponsor Sir John Butterfill MP, would give building societies greater freedom to merge with other companies as well as changing the current restrictions on the way they are allowed to raise money. The deal would also have to be approved by members.

In a statement, the two mutuals said they would continue to have a significant presence both in Manchester, where CFS is based, and in Leek in Staffordshire where Britannia is based.

They say the customer-owned "super-mutual" will be an ethical alternative to shareholder-owned banks. "Owing to the damage done by the credit crunch, people have been crying out for a new way of doing business with a financial organisation of substance that truly has their interests at heart," said CFS chief executive David Anderson. "This merger will create that organisation and we'd hope to attract many thousands of new customers as a result." The merged business would have nine million customers, more than 12,000 employees, 300 branches and 20 corporate banking centres. In towns in which the merged group ends up with two or more branches, some of them may close, but there has been a promise that there will be no compulsory redundancies.