Banks to speed up cheque clearing times

Banks could soon be under pressure to follow new standards to speed up the time it takes to clear a cheque.

Under proposals made by the Office of Fair Trading's Payment Systems Task Force, consumers and businesses will be able to withdraw money deposited by cheque into current accounts no later than four working days after the cheque is deposited.

The reforms, which include being able to access funds faster, will take effect from November 2007 in a bid to improve customer experiences of the cheque-clearing system.

A report published today by the Cheques Working Group, led by the OFT, found there is no case for a complete rebuild of the cheque-clearing system.

Government research has found the number of cheques in circulation is falling by around eight per cent per year, and this rate of decline is likely to increase substantially when a new, faster payments service becomes available in November 2007.

Several major retail groups are now declining cheques as a payment mechanism.

The move comes as Ed Balls, economic secretary to the Treasury, said that a new, independent governance body for payment systems called the Payments Industry Association would take over from the OFT after December.