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Ed Balls, Economic Secretary to the Treasury, is expected to announce that,
following a recommendation from the Chairman of the Office of Fair Trading, the
Chancellor of the Exchequer has agreed to the establishment of a new governance
body for payment systems, the Payments Industry Association.
In addition, the Payment Systems Task Force, which is chaired by the OFT, has
also announced that agreement has been reached on a number of improvements to
the cheque clearing process that will benefit both consumers and businesses.
The Payments Industry Association will be the new strategic governance body for
the payments industry in the UK, and will concentrate on access, innovation and
governance issues.
It will provide a lasting governance solution to the issues raised in the
Cruickshank Report.
The Payments Industry Association Board will consist of independent directors
and directors from the payments industry with an independent Chairman, Brian
Pomeroy.
The OFT will review the outputs and achievements of the Association against its
objectives after two years.
The Chancellor has agreed that the majority of the outstanding work of the
Payments Systems Task Force can be transferred to the Payments Industry
Association.
The Task Force will meet for the last time in December.
In the Cheques Working Group report published today, the Task Force concluded a
number of significant improvements can be made to current clearing arrangements.
All of these reforms will take effect from November 2007 and will improve all
users' experience of the cheque clearing system, particularly vulnerable
consumers, basic bank account holders and small businesses.
The OFT, as well as the sponsors of the Banking Code and other Task Force
members, will recommend to the Independent Reviewer that, where appropriate,
these changes should be inserted into the Banking Code in March 2008.
The main proposed changes are:
► Money deposited into any account will start to earn interest (in
interest-bearing accounts) or will count against overdrafts no later than two
working days after the cheque is deposited.
► All consumers will be able to withdraw funds deposited by cheque into current
and basic bank accounts no later than four working days after the cheque is
deposited.
For instant access savings accounts and those savings accounts from which
withdrawals are allowed subject to a penalty, withdrawal will be available no
later than the sixth working day after the cheque is deposited.
► Financial institutions will not be able to take money deposited by cheque back
out of an account later than six working days after deposit ('guaranteed fate'),
unless the payee is a knowing party to fraud.
Currently, there is no maximum
time limit for fate in the UK. This agreement puts the UK in a world-leading
position.
These limits will provide consistency and clarity for consumers, and will bring
basic bank accounts fully into line with other types of current account.
All cheques, regardless of where in the UK they are drawn or paid in, will be
subject to the agreed limits outlined above.
This single UK-wide proposition removes delays on cross-border cheques and
provides clarity and consistency for UK consumers, particularly those in
Northern Ireland.
The Task Force has concluded that there is no case for a complete rebuild of the
cheque clearing system.
Research shows that the number of cheques in circulation is falling by around 8%
a year, and this rate of decline is likely to increase substantially when the
new faster payments service becomes available in November 2007.
In addition, several major retail groups are either trialling not accepting
cheques as a payment mechanism at their tills or have stopped taking cheques
altogether.
There is no float in the central cheque clearing system and any float created by
the practices of individual banks and building societies will be eliminated by
the new agreement on payment of interest.
The figure of £30 million referred to in the OFT's 2003 report 'UK Payment
Systems' relates to float created in electronic payments (payments initiated by
telephone and internet, and standing orders).
This will disappear with the introduction of faster payments in November 2007
Jonathan May, OFT Chairman of the Payment Systems Task Force, explained: "The
creation of the Payments Industry Association is good news for both consumers
and businesses.
"It will provide strategic direction to the development of payment systems in
the UK and its strong governance arrangements will ensure that the needs of
users are taken fully into account.
"The Task Force welcomes the agreed changes to the cheque clearing system, which
will lead to much greater transparency, clarity and consistency for customers".
Source:
Credit
Control Journal
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