Group of MPs warns that without a guarantee scheme or alternative, cheques could 'wither on the vine'
The government should consider legislating to ensure the return of the cheque guarantee card, a group of MPs has said, or shops may refuse to accept cheques. The warning came as the Payments Council said it was reviewing its decision to abolish the scheme.
The use of the card, which ensured that some cheques up to �50 or �100 were honoured, ended at the end of June when the Payments Council, whose members include Britain's biggest banks, abandoned it due to declining use.
At the same time, the council was forced to renege on plans to end the use of cheques altogether, after strong objection from campaign groups that said ending cheques would hit the elderly, the vulnerable and small businesses.
The argument for legislating for the return of the cheque guarantee card was put forward by the Treasury Select Committee in a report addressing responses to its inquiry, published in August, on the future of cheques.
It warned then that without a guarantee scheme or alternative mechanism, cheques could "wither on the vine" due to the risk of shops and other bodies refusing to accept them without knowing whether or not they will bounce.
The Payments Council is set to publish research into the impact of the closure of the cheque card guarantee scheme, which will be concluded before the end of the year. It promised: "If so indicated by the research, we will revisit the business case for the closure of the scheme."
But the select committee said the Payments Council should provide more details about its research and on the decision-making process.
It said: "The government threatened to legislate to preserve cheques prior to the Payments Council's change of heart. When the council's report is to hand, the government may wish to consider whether intervention on the guarantee card is also warranted."
Campaigners for older people, who are less likely to use methods such as internet banking, have been fighting for the return of the cheque guarantee card.
Michelle Mitchell, charity director of Age UK, said: "Age UK has been calling for months for the reintroduction of the bank guarantee card or some other method to ensure that retailers can have confidence in cheques.
"This report is a strong signal to the government to ensure that banks listen and protect what is an essential method of payment for many older people."
Source: http://www.guardian.co.uk/money/2011/nov/16/mps-urge-reinstatement-cheque-guarantee-card
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