vallierojas: Cheque abolition re-examined

MPs will examine decision by Payments Council to dispose of cheques in 2018 following consumer pressure

Cheques could be reprieved as a result of a Treasury Select Committee inquiry into their abolition, following pressure from consumer groups and charities.

The inquiry, chaired by Andrew Tyrie MP, will focus on how doing away with cheques will impact on millions of vulnerable individuals, small businesses, charities, clubs and hospices.

In December 2009 the Payments Council announced that cheques would be phased out by October 2018, but only if alternatives were developed. It also abolished the cheque guarantee card scheme, meaning it will no longer be possible to guarantee a cheque up to a maximum of �250 by handing over a card featuring the scheme's logo or hologram after 30 June this year.

In response, the Treasury launched an inquiry in February 2010 on the future of cheques and heard evidence from a range of organisations, including the Payments Council, which said cheques were in "terminal decline". That statement has since been rejected by the Treasury, which has also expressed concern about the rigour of its cost-benefit analysis.

In a further blow to the council, which was established in March 2007 by payment services providers, the committee will examine its structure and performance, including whether it is sufficiently accountable for the way its decisions impact on consumers, how well it is delivering on its core objectives, and how its work fits with the industry's efforts to reduce the level of fraud.

Tyrie said the recommendations made by the inquiry later this year could include asking the Office of Fair Trading to look at the Payments Council's decision on cheques, and even legislation to prevent their abolition.

The inquiry will also seek to determine estimates of likely usage of cheques over the next decade, and the advantages and disadvantages of their abolition including the impact on particular groups in society, as well as the development of suitable alternative payment mechanisms.

Tyrie said: "A decision of this size, which affects millions of people, businesses and charities, should not be imposed on us de facto. The Payments Council has not thought through its arguments carefully enough and its first piece of work on the cost-benefit of abolishing cheques was clearly defective.

"We are demanding more rigorous anlaysis; the public deserve no less. I am asking the question: is it right that one institution can force through such a radical change in our behaviour?"

He said the inquiry will focus on three themes, "choice, competition and fraud". "The Payments Council had seemingly forgotten about the millions of people who remain less at ease with the latest technology. Since our last inquiry we have been inundated by letters from the public telling us that they rely on cheques," he said.

"Many charities, small business and vulnerable people ? including pensioners ? depend on cheques. Their needs must be considered. They should not be forced into shredding their cheque books. We will also want to examine whether it is in the public interest that apparently competition can, and should, be set aside on this."

Dependency remains

According to the Payment's Council cheque use peaked in 1990 when 11m were written a day, falling to 3.5m a day in 2009. Charity Age UK said people aged 65 and over were the most frequent users of cheques in 2009. It said some people are particularly dependent on them because they cannot get out of the house to draw cash and are reliant on other people for support, and cannot manage the security systems needed for telephone banking and/or do not have internet access (and even if they did, they could not use it to draw cash).

Michelle Mitchell? director of Age UK? said: "Scrapping cheques without there being a suitable replacement is not acceptable. If you find it difficult to leave the house then cheques are often crucial in allowing you to pay bills securely and safely. Taking that option away could leave many vulnerable older people with no choice but to hand over their pin numbers and cash cards to others, going against all the guidance given by banks.

"Over the years we have heard from many older people who are really worried about this issue. Many are unable or unwilling to start internet banking and so are really concerned about how they will cope if cheques go."

Richard North, chairman of the Payments Council, welcomed the "opportunity to update the Treasury Select Committee on our decision" and said his organisation was committed to being "fully transparent".

He added: "This inquiry enables us to reassure consumers and businesses that cheques will not disappear unless we deliver on our commitments to make sure that acceptable alternatives are in place and available."

The inquiry is inviting submissions from interested parties until Friday 6 May and expects to publish its findings later this year.

Mark King

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