Payment system improvements

Background

Payment Systems are systems that enable the transfer of funds, whether that be via cash, direct debit, standing order or cheque or via the debit, credit or ATM networks. These systems are essential to virtually all economic activity.

In 2003, a Task Force was established to resolve issues relating to the efficient and competitive operation of payment systems. Issues affecting consumers that  stem indirectly from payment systems may also be considered.

The establishment of the Task Force came in the context of increasing public and media interest in payment systems.  In March 2000 Don Cruickshank produced his report Competition in UK Banking (the Cruickshank report) and this report covered many areas including payment systems.

The work of the Task Force was based mainly, but not exclusively, on the issues raised by the Cruickshank report.  These issues included governance, access, wholesale pricing, innovation and price transparency of payment systems.  The purpose of the Task Force was to establish how much change there had been, and whether there should be more.

The Task Force was chaired by the Office of Fair Trading (OFT) and brought together representatives from the financial sector, retail, consumer and business bodies, including the BSA. In November 2006, the Task Force recommended that the financial services industry introduce faster payments and cheque clearing.

Once it had made its recommendations the Task Force came to an end.

Cheque clearing improvements (2-4-6 & 2-6-6)

The Task Force set up a number of working groups to look into specific payment system issues. The Cheques Working Group investigated the need for improvements to the cheque clearing system and produced a report with recommendations. Its main recommendation was to introduce maximum time limits for cheque clearing for value, withdrawal and fate (or in other words, when interest is paid, when a customer can withdraw money from his account and when he can be certain that the financial institution will not remove the money from his account). From 30 November 2007, the maximum time limits are 2 working days from the day of deposit for paying interest, 4 working days for withdrawal (or 6 if the money was paid into a savings account) and 6 working days for fate. The changes are sometimes referred to as 2-4-6 (or 2-6-6 for cheque paid into savings accounts).

The Cheque and Credit Clearing Company (C&CCC) and APACS have produced a consumer leaflet explaining the improvements and more information is available on the C&CCC website.