HM Treasury has published a consultation on draft secondary legislation for two measures to support the introduction of the image clearing system (ICS) for cheques. The aim of the proposed secondary legislation is to ensure that the ICS for cheques has no detrimental impact on the existing position of cheque users. The proposed legislation on which HM Treasury is seeking views concerns:
- the use of cheques as evidence of payment. Section 3 of the Cheques Act 1957 provides that a cheque, or certified copy of a cheque, which appears to have been paid by the banker on whom it was drawn, can be used as evidence of payment to the payee. Under the new ICS, the payer’s bank will no longer receive the original cheque from the payee’s bank. Instead, the payer’s bank will receive a digital image of the cheque from the payee’s bank. HM Treasury proposes to legislate to specify that the payer can request from their bank a copy of the cheque, which under the legislation, will have to be accompanied by details which are listed by HM Treasury as additional information. HM Treasury also proposes that the first copy of the paid cheque with the accompanying additional information should be provided free of charge; and
- The primary legislation enabling cheque imaging includes a provision for HM Treasury to require the payee’s bank to compensate another party for a loss that partly incurs in connection with the electronic presentment of a cheque. The Government does not have the power to require any bank other than the payee’s bank to compensate for a loss. This is because under ICS the payee’s bank is the only bank that will be able to receive the original cheque. Therefore, the Government proposes to put in place a safety net to require that the payee’s bank compensate a customer, who has not been complicit in fraud or acted in a grossly negligent way, for direct loss that they incurred in connection with the presentment of a cheque under the new ICS. To ensure that the payer’s bank continues to be incentivised to compensate their own customers promptly, the Government proposes to include the bank that paid the instrument as a possible claimant.
In addition to the consultation, HM Treasury has also published two annexes setting out the:
- primary legislation enabling cheque imaging, that is the Bills of Exchange Act 1882; and
- proposed secondary legislation, that is the Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018.
The deadline for comments on the consultation paper is 1 December 2017.
HM Treasury intends to publish its response document in February 2018, at which time the legislation will be laid in the Parliament with a view for the legislation to apply in April 2018.
HM Treasury has published a consultation on draft secondary legislation for two measures to support the introduction of the image clearing system (ICS) for cheques. The aim of the proposed secondary legislation is to ensure that the ICS for cheques has no detrimental impact on the existing position of cheque users. The proposed legislation on which HM Treasury is seeking views concerns:
- the use of cheques as evidence of payment. Section 3 of the Cheques Act 1957 provides that a cheque, or certified copy of a cheque, which appears to have been paid by the banker on whom it was drawn, can be used as evidence of payment to the payee. Under the new ICS, the payer’s bank will no longer receive the original cheque from the payee’s bank. Instead, the payer’s bank will receive a digital image of the cheque from the payee’s bank. HM Treasury proposes to legislate to specify that the payer can request from their bank a copy of the cheque, which under the legislation, will have to be accompanied by details which are listed by HM Treasury as additional information. HM Treasury also proposes that the first copy of the paid cheque with the accompanying additional information should be provided free of charge; and
- The primary legislation enabling cheque imaging includes a provision for HM Treasury to require the payee’s bank to compensate another party for a loss that partly incurs in connection with the electronic presentment of a cheque. The Government does not have the power to require any bank other than the payee’s bank to compensate for a loss. This is because under ICS the payee’s bank is the only bank that will be able to receive the original cheque. Therefore, the Government proposes to put in place a safety net to require that the payee’s bank compensate a customer, who has not been complicit in fraud or acted in a grossly negligent way, for direct loss that they incurred in connection with the presentment of a cheque under the new ICS. To ensure that the payer’s bank continues to be incentivised to compensate their own customers promptly, the Government proposes to include the bank that paid the instrument as a possible claimant.
In addition to the consultation, HM Treasury has also published two annexes setting out the:
- primary legislation enabling cheque imaging, that is the Bills of Exchange Act 1882; and
- proposed secondary legislation, that is the Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018.
The deadline for comments on the consultation paper is 1 December 2017.
HM Treasury intends to publish its response document in February 2018, at which time the legislation will be laid in the Parliament with a view for the legislation to apply in April 2018.
View Legislation to support cheque imaging: consultation, 3 November 2017
View Annex A:Bills of Exchange Act 1882, 3 November 2017
View Annex B: Electronic Presentment of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018, 3 November 2017