Payments Council Sets a Time Frame for Withdrawing the Guarantee Scheme for Cheques

The Payments Council has today announced that following a full stakeholder review and detailed research, it believes that use of the Cheque Guarantee Card Scheme is in terminal decline and that this needs to be managed to provide clarity and certainty for users and acceptors. It has therefore taken the decision to set a timescale for managing the decline of guaranteed cheques and ultimately to close the Scheme. The Council’s review has determined that a realistic timescale for withdrawing the Scheme is two years: this is to ensure that the remaining users and acceptors have full information about the available alternatives. This means that the earliest the Scheme will close is mid-2011.

Cheque Guaratee Logo

The Cheque Guarantee Card Scheme is the central UK Scheme that sets the rules for the use and acceptance of guaranteed cheques and that uses a depiction of Shakespeare on participating plastic cards as a common identifier.

The Payments Council’s decision follows extensive consultation with consumers and businesses that still use and accept guaranteed cheques to understand why they still use them and to ensure alternatives exist. The Council believes that alternatives to the guaranteed cheque exist and are widely available, and that a well-planned withdrawal of the Scheme will not cause any significant problems for users or acceptors. The Payments Council’s full report is available from www.paymentscouncil.org.uk.

Key facts include:

• The use of guaranteed cheques is in rapid decline with volumes down a third in the last year and by 70% in the past five years.
• Last year, of the 1,400 million cheque transactions, just under 7%, or 95 million were supported by a cheque guarantee card; the number is falling rapidly. Four million consumers say they still use guaranteed cheques regularly but in many cases the guarantee function is not an essential part of the transaction.
• Over 99% of the 59.9 million cheque guarantee cards still in issue are also either debit or credit cards; the vast majority being debit cards which, of course, provide an alternative and widely-accepted means of payment.
• In 2008, losses totalling £43 million were reported as a result of cheque guarantee card misuse.
• Most major high street retailers no longer accept cheques as a form of payment.
• The average transaction value of a personal cheque is £267. The maximum guarantee limit is £250, with 88% of all cards having a limit of £100 or under.
• In the research conducted as part of the Payments Council review of the Scheme, only a quarter of all businesses said that they had received a guaranteed cheque in the previous six months.

The payments industry will now need to confirm a viable date for closing the Scheme and for communicating and managing this process with all users and acceptors; remaining throughout in close consultation with the Payments Council.

Importantly this decision does not mean that cheques cannot continue to be used.. Consumers will still be able to write cheques and businesses can continue to accept them even after the Scheme’s withdrawal. This decision does mean that some acceptors may want to plan to accept alternatives to cheques in the future, if they already don’t accept alternative payments.

The Payments Council identified as one of its priorities an objective and transparent review of the future of the Cheque Guarantee Card Scheme in the National Payments Plan. This was an entirely separate exercise from its major review of whether a date should be set for the central cheque clearing to be closed: the Council is due to report on this by the end of this year. Whilst it’s generally accepted that cheques are in terminal decline and that managing the process is preferred by all parties, the Payments Council has made it clear that a date for closing the cheque clearing cannot be set until it is confident that alternatives for the vast majority of current cheques uses have been identified and that these will be both accessible and acceptable to users.

Brian Pomeroy, Chairman of the Payments Council comments, “The Payments Council undertook an objective review of the Cheque Guarantee Card Scheme as one of the key priorities identified in the UK’s first National Payments Plan. The underlying principle of the Plan is to forge strategic change and innovation in the payments arena through active consultation with external stakeholders - rather than allowing the payments industry to be sole arbiter.

“In keeping with this aim, our review of the Cheque Guarantee Card Scheme has been extensive, and our published report demonstrates the scope and scale of the consultation and analysis undertaken: it sets out all the evidence, including the cost-benefit case, that the Payments Council Board reviewed before taking its decision. We went to great lengths to listen to the views of all users and acceptors of guaranteed cheques and have only made the decision to withdraw the Scheme after satisfying ourselves that no group will be unfairly affected or find that there is no means of making a payment. Having objectively considered the views and interests of all parties, we believe the aim should be to close the Scheme in an orderly manner. This is preferable to the alternative of doing nothing, which would run the risk of further piecemeal withdrawal of cheque guarantee functionality by card issuers and reduction in acceptance by retailers, which could rapidly lead to consumer and acceptor confusion about the scope of the Scheme and a general loss of confidence.”

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