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LONDON: The Office of Fair Trading (OFT) is to lead a taskforce investigating the time that cheques take to clear, responding to concerns raised by small businesses which have argued that banks should speed up the process of clearing payments.
The competition watchdog stressed it was not certain there was sufficient appetite among business and consumers for it to compel banks to clear cheques more quickly. But an earlier investigation into electronic payments resulted in the banks agreeing to cut the time taken for them to clear.
The Association for Payment Clearing Services, representing the banks, said the inquiry only added to a welter of regulatory work for the industry.
The Payment Systems Task Force, chaired by the OFT and including representatives of banks, business and consumer groups, will carry out the inquiry, delivering its findings next summer.
In May, the taskforce reached a consensus on reducing the delay in clearing electronic payments, which had taken up to three days. Within two years from then, to give banks time to upgrade their IT systems, electronic payments will clear on the same day that they are made.
Mark Kram of the OFT said: "The reason we did electronics first is that it's growing in importance and to see whether people actually do want faster clearance."
Cheques, which take three working days to clear, are set to prove a stickier issue for the various interest groups to resolve.
They account for only 6.0 per cent of retail transactions and banks are reluctant to invest in speeding up a means of payment that is diminishing in importance.
But companies that are frequent recipients of cheques argue the current delay in clearing costs them money.
Stephen Alambritis, of the Federation of Small Businesses, said: "There is no excuse for banks to hold on to a cheque for three or four days. A cheque for £200 being [cleared] a day or two late could cause a small business to run into problems with their bank."
He said clearing should not take more than two days. Banks, which had "the profits and the resources" to absorb losses or pursue those who wrote bounced cheques, should "give small business the benefit of the doubt and get the money into their accounts". "Some very large companies can insist on credit cards only and can get away with it. In the small business world, [cheques] are still ... quite prominent," he added.
Apacs said: "What businesses say is they want to pay their suppliers by cheque, but they want to receive their money electronically."
The cheque inquiry was part of a "hefty agenda", it said. "We've got practically a whole department dealing with OFT-related issues, which costs banks money. As a parallel, looking at faster electronic payments is coming in at tens of millions."
Mr Kram said the OFT had no prejudice about the inquiry's outcome and suggested consumers and businesses might even find some benefit in the longer clearance period of cheques.
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