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Is this the end of the road for cheques?

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Many people were pleased last month when the Payments Council announced an about turn in their decision for cheques to be abolished by 2018.  This followed much lobbying and press coverage from MPs and charities such as Age UK who had rightly highlighted that cheques are a much needed lifeline for elderly people and small businesses alike.

However, there have been further criticisms raised as the Payments Council have closed the cheque guarantee system.  This means that without the guarantee system in place, many retailers may stop accepting cheques already.  Indeed, many of the major retailers including high street stores and supermarkets have already declined to accept payment by cheque.  It is not unlikely to foresee that where the larger retailers lead, smaller stores will follow suit.  

The worry for many people will be that the abolition of the cheque guarantee system is a bid to discourage the use of cheques “by the back door.”  By making it more difficult to use cheques, the number of cheques used each year could potentially decrease at a faster rate than it would were they still widely accepted by retailers.  This in turn will then potentially allow the banks to argue that the system of paying for goods by cheque is no longer viable to run.    Figures do show a decline in the use of cheques over time but whether this is because more retailers do not accept cheques or whether it is due to a decline in popularity of cheques in general cannot be ascertained.   

A recent survey highlighted that 73% of people over the age of 65 pay by cheque for goods and services.  It is estimated that over 6.5 million people over the age of 65 do not have access to the internet so an alternative method of payment which is internet based would exclude a proportion of society.   Similarly, cheques are a life line for small businesses who do not have the facilities or the time to process payments made using cards.

The difficulty in abolishing cheques is that the banks have, as yet, failed to devise a viable alternative method of payment.  There have been proposals of an electronic system, a mobile phone based system or an alternative “paper based” system but to date, no firm proposals have been put forward as a viable alternative to the use of cheques. 

In the absence of an alternative system which is readily available to all sections of society, there is concern that individuals, particularly those who are elderly will revert to having large amounts of cash at home to pay for services which obviously raises further concerns regarding security. 

On the existing timetable, a review by the Payments Council will be undertaken in 2016 so it remains to be seen what alternative system is put in place. 

If you would like to discuss this topic further then please contact Helen Gott a solicitor in the Private Client Department on 0113 336 3321.

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