Payments Council must not have power to abolish cheques
24 August 2011
The industry-dominated Payments Council should no longer have the unfettered power to decide the future of cheques, or other payment methods that directly affect millions of people, the Treasury Select Committee says in a report published on 24 August 2011.
The Committee welcomes the belated decision of the Council to retain cheques, but warns the Payments Council to ensure that the banks do not attempt to abandon cheques by stealth, nor deter customers from using cheques.
The Report recommends that:
- the Treasury should make provision in the forthcoming Financial Services Bill to bring the Payments Council formally within the system of financial regulation;
- the Payments Council must obtain a commitment from the banks to give the Council advance sight of any material related to the future availability of cheques that the banks send to their customers;
- all banks should be required to write to their customers stating that cheques will continue to be in use for the foreseeable future;
- the Payments Council should examine the reintroduction of the cheque guarantee card;
- changes be made to the composition of the Board of the Payments Council in order significantly to strengthen the voice of consumers. As an immediate first step, any two of the four independent members, rather than all of them as at present, should have the right of veto over a decision of the Council.
The Chairman of the Committee, Andrew Tyrie, said:
"Cheques have been saved, for the moment, but we need to remain vigilant. The incentives for the industry to get rid of cheques has not gone away. Neither have we. That is why we are making far–reaching recommendations about the future of the Payments Council as well as to secure the future of cheques.
The Payments Council is an industry-dominated body with no effective public accountability. It should not have unfettered power to take decisions on matters, such as the future of cheques, or other issues, that are of vital importance to millions of people.
This is why we have recommended that the Council be brought within the formal regulatory system.
As an immediate first step the Board of the Payments Council should have greater consumer representation.
The decision of the Payments Council in December 2009 to set a target date of 2018 for the abolition of cheques was taken without an assessment of the costs and benefits and without providing any indication of what alternatives to cheques would be put in place.
Banks have also given many customers the impression that the abolition of cheques was a foregone conclusion. This type of behaviour is unacceptable and cannot be allowed to continue.
The Payments Council’s decision caused great and unnecessary concern among bank customers. And during the course of the Treasury Committee’s inquiry it became clear that the Council’s plans did not have the confidence or support of the public, Parliament or the Government.
The attempt to abolish cheques has reflected the same lack of transparency in retail banking, that we highlighted in our report on Competition and Choice in the sector earlier this year.
It is increasingly accepted that improving consumer choice will require more competition in the sector. The new Financial Conduct Authority should be given a primary duty to promote competition. The Committee is also calling for this. Unfortunately, the Government is resisting it."
The Report also calls on the Payments Council to examine reintroducing the cheque guarantee card system that was withdrawn earlier this year.
The Payments Council announced on 12 July 2011 that cheques will continue for as long as customers need them and that the target for possible closure of the cheque clearing in 2018 had been cancelled. This followed pressure from the Treasury Select Committee which reopened its inquiry into the Future of Cheques in April this year.
The Committee published its report on Competition and Choice in the Banking Sector on 2 April 2011: