Cheques: Payments Council to be curbed
The government is punishing the Payments Council for trying to phase out cheques, but failing to come up with an alternative.
The Council will lose its power to govern the payments systems for UK banks, under new proposals.
The government wants to hand the Council's powers to a new body overseen by the new Financial Conduct Authority.
The change would make banking "more responsive" to the needs of its users, the Treasury said.
"We need a payments system that responds to the needs of customers and is not just run for the banks," said Mark Hoban, the financial secretary to the Treasury.
"The payments industry, which sets strategy on important payment mechanisms including the future of cheques, is central to the functioning of the economy, yet the government does not feel it has always responded effectively to the needs of consumers."
Adrian Kamellard, chief executive of the Payments Council, welcomed the government's announcement and said the body would still have a valid role.
"This is borne out by the fact that the Treasury has entrusted us to deliver a new faster account switching process in September next year," he added.
"We are also on track with our work to help deliver mobile payments to customers across the industry and a clear future strategy for payments."
Back in 2009, the Payments Council suggested that cheques should be phased out from 2018.
After widespread criticism, the plan was abandoned last year.
But it became apparent that despite earlier promises, no practical alternatives to cheques had been devised.
Critics, including government ministers and MPs, became convinced the suggested move had been devised entirely for the convenience of the banks, with little or no consideration for the impact on people who still needed or wanted to use cheques.
"Although the Payments Council was clear that suitable alternatives would need to be available before cheques were abolished, at the point when the Treasury select committee launched an investigation into this issue in April 2011, no progress had been made to develop suitable alternatives to the cheque," the Treasury said in its consultation document.
"The Treasury select committee... found that, given the Payments Council is dominated by the banks and other payments industry members, consumers were entitled to be suspicious of the motives of the Payments Council when proposing measures that were in the financial interest of its members."
The government has lost confidence in the Council and is now consulting on three possible changes:
- its preferred option of setting up a new Payments Strategy Board, under the auspices of the Financial Conduct Authority, to run the payments strategy of the banking industry
- simply reforming the existing Payments Council, with independent members being given the power to veto its decisions
- or going much further and creating a new regulator for the payments industry, similar to the existing regulators for the various utility industries.
The government stressed there was not a "do nothing option".
"The consultation proposes reforms that will protect those who rely on more traditional payment mechanisms by ensuring that consumer concerns are taken into account," said the Treasury.