The end of Cheques? - Treasury Contents

Written evidence submitted by J R Rook

  I understand that your Committee is to consider the phasing out of cheques in favour of an alternative payment system and I thought you might allow me to make some points as an individual bank customer. I appreciate that cheques are likely to be an expensive system but in proposing an alternative it is up to the banks to ensure that the system is fair to customers and easy for all to use.

  1. There must be a way in which the customer can prove that the bank is wrong. At present, this is fairly simple. The bank has to retain the cheques, or in practice, copies. If the cheque differs from the amount debited, or the signature is not correct or if it has been credited to the wrong account then that is the bank's problem to sort out. It may be thought that this is a rare situation but I have had to ask my bank to correct matters twice in the last three years.

  2. The bank should never be able to use any argument along the lines that the "technology is infallible". This argument, or a similar one, is always their first line of defence and the customer has no real defence. I do appreciate the problem for the banks. If they do not adopt this view then anyone can go along, say the bank is wrong and claim a refund. On the other hand, it seems that the banks want to phase out cheques. It is up to them to provide an alternative system which enables them and the customer to prove each other wrong; as the present cheque system does. The banks say something along the lines, "we are always sympathetic" but they are not if it involves paying money out! To see their reluctance it is only necessary to read the correspondence of customers to the press.

  3. A cheque paid to an organisation is legally also a receipt. What is going to be the new legal receipt or are firms now going to revert to always issuing free receipts? I have had this problem also. I paid a cheque to an insurance company which then alleged it had not been paid and would not wait to sort out the problem. Eventually a copy of the cheque paid into their account proved them wrong.

  4. In connection with (4) and the matter of legal receipts. There are now a number of alternative payment systems which the banks might think of, the Post Office or Paypoint for example. I can see that these might be used but the status of a payment needs to be clearer than it is at present. These organisations do issue receipts. However, this only means that, say the PO has received the payment and not the final organisation. The system should be clarified so that the customer is never involved in a battle between the receiver and the final organisation. Nor affected by possible bankruptcy. (The other issue is that Paypoint only takes cash, mostly.) In short a receipt by the payment taker should be the same as a receipt by the final organisation.

  5. The system needs to work for individuals and tiny organisations. A cheque in the post is easily done as post boxes are everywhere but banks and Post Offices are becoming more difficult to reach.

  6. The system should not require PINS. I cannot remember PINS unless I write them down and that then means I would always be at fault! There are chip and signature cards and I do have one. However in general, credit card issuers and other banks have not been willing to issue them. I do feel uneasy about my debit card because the bank does not allow me to restrict the amount of withdrawal. It finds no trouble in restricting the amount of cash withdrawl nor in restricting the amount available on credit cards! I suspect that maybe because the bank is at risk in those cases! In summary here I feel that the rules for cards are more to protect the banks than to protect me.

  7. I see that telephone banking might be acceptable but at the moment, I cannot prove the bank wrong! Additionally I need a PIN and the bank charges a premium rate (0844, it did change it when it 0845 became like a local number!) and spins out the call by giving endless information.

  8. The internet will be raised by the banks. However this is expensive; the purchase and maintenance of the computer, security systems, cost of broadband connection and so on. Also I simply do not believe these systems are secure and I worked with computers for many years!

  To summarise I would say that any new system should have the following:

    1. Clear way for the customer to prove the bank is wrong.

    2. Clear legal receipt system.

    3. Works without PINS if the customer wishes.

    4. Works by using the post.

    5. Banks responsible for fraud.

    6. Telephone and internet not required.

February 2010

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