The end of Cheques? - Treasury Contents


Written evidence submitted by Melvin Anderson

SUMMARY

  1.  Cheques should either be retained, or an alternative should be introduced which is accessible to housebound elderly and handicapped,

  2.  any replacement for cheques should generate a trustworthy evidence trail that is available for dispute resolution, and

  3.  any replacement for cheques should receive the same support in law as the current cheque system.

INTRODUCTION

  My qualifications include a Ph.D. in Computer Science from Cambridge University and an M.Sc. in Information Security from Royal Holloway College, London. I have worked professionally in computing, information security and telecommunications, but have no connection now or in the past with the payments industry. I write these notes from a personal point of view as a user of payment systems but with insight into information security techniques.

RESPONSE TO REQUEST FOR EVIDENCE

  My response to the areas on which the committee seeks evidence:

  Trends over time in the use of cheques as a payment mechanism, including estimates of likely usage over the next five to 10 years.

  I have no evidence to submit.

  The advantages and disadvantages of abolition, including the impact of abolition on particular groups in society.

  The abolition of cheques will have a profound effect on the elderly and infirm. For example, my widowed mother resides in a nursing home. She is mentally active, but frail. She does not have Internet access and her hearing is too poor to use telephone banking. She is not mobile enough to be able to visit a bank branch. My mother currently manages her finances by post and uses cheques.

  It is important for my mother's independence that she is able to manage her finances for as long as she is mentally able to do so. This means either that she should continue to be able to use cheques, or that any replacement should be accessible to her and others in similar circumstances.

  Any replacement should not require a PIN (which she would have difficulty remembering) or use cards or tokens which she could not keep secure in the open environment of a nursing home.

  The development of alternative payment mechanisms.

  There are two requirements that must be met by any future cheque replacement.

  Firstly, any replacement for cheques must generate an evidence trail of which a copy can be requested by the bank customer and which is trustworthy enough for dispute resolution.

  The terms and conditions of my bank's current account states:

    "We will keep original cheques paid from your account or copies for at least six years unless we have already returned these to you. Subject to this, if there is a dispute about a cheque paid from your account, we will give you the cheque or a copy as evidence."

  There is no equivalent for electronic fund transfers, which makes payment disputes difficult and expensive to resolve. For a discussion see "Reliability of Chip & PIN evidence in banking disputes", Steven J. Murdoch, Digital Evidence and Electronic Signature Law Review, 6 (2009) 98-115.

  Secondly, cheques have legal standing that is not enjoyed by other payment methods. For example:

  The effect of the Bills of Exchange Act 1882 is that if a bank debits a customer's account with a cheque which has a forged signature, the bank must re-credit the account.

  Where a PIN has been forged, perhaps because a miscreant watches the PIN being entered and subsequently steals the card, banks often refuse refunds. See Steven J. Murdoch's paper cited above.

  The Cheques Act 1957 has the effect that a cancelled cheque or a certified copy is evidence of payment in the event of dispute. I have very occasionally needed to use this where a payee denies receipt of payment, or claims only partial payment has been made.

  Any replacement for cheques must have equivalent legal standing as cheques, and necessary legislation must be passed before the use of cheques is withdrawn.

February 2010





 
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