MPs slam Payments Council's cheque abolition decision
The Treasury Select Committee's damning report was welcomed by consumer rights groups. The committee described the Payments Council as an "industry dominated body", which should no longer have the "unfettered power to decide the future of cheques or other payment methods that directly affect millions of people".
The TSC's report, out today, calls for the Payments Council to be regulated, and pushes for changes to the Council's board to "strengthen the voice of consumers". It recommends that banks give the Council "advance sight of any material related to the future availability of cheques that the banks send to their customers," and that banks should write to their customers to tell them that cheques will be in use for the foreseeable future.
The TSC's chairman, 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."
Claiming that cheque use was in "terminal decline," the Payments Council announced two years ago that cheques would be phased out by October 2018. The cheque guarantee card scheme was also abolished with effect from last month. This means it is no longer possible to guarantee a cheque up to a maximum of £250 by handing over a card featuring the scheme's logo or hologram. The guarantee meant that a cheque was honoured by the bank, even if there were insufficient funds in the account.
However, after the Treasury launched an inquiry last year into the Payments Council's structure and performance, the body rowed back on cheques last month, ahead of the TSC's report's publication. The Council's head Richard North said cheques would not be abolished until an alternative paper-based payment system has been set up to replace them. Elderly people, charities and tradesmen rely heavily on cheques.
Consumer groups were delighted. Sarah Brooks, director of financial services at Consumer Focus said: "We echo the committee's calls that cheques must not face an unmanaged decline. Cheques may not be able to survive forever but they must stay until there are workable alternatives that suit the businesses and consumers who still rely on them. While use may be declining, around two-thirds of people still cash and write cheques, with over a billion processed every year.
"Payment systems can be seen as a utility in the same way as the railway network or National Grid. They should be subject to effective regulation and decision-making to make sure the system works well for everyone who needs them to pay for goods and services. Current changes to financial regulation provide an opportunity to address how decisions on the future of cheques should be made. We call for the future financial regulator, the FCA, to have a statutory oversight role in payments."
Richard Lloyd, executive director of consumer group Which?, hailed the decision to retain cheques for now as a victory for consumers, but stressed that the Payments Council must now guarantee that banks will not deter customers from using them.
He added: "It's unacceptable that the Payments Council, as an unregulated, industry-dominated body has the power to make unilateral decisions about payment methods that affect millions of people. The structure of the Payments Council now needs to be reviewed, and the voice of consumers strengthened on its board."