On 30 April 2018, HM Treasury published its response to its earlier consultation on two measures to support the introduction of the Image Clearing System (ICS) for cheques. The first concerned the use of cheques as evidence of payment. The second concerned compensation. The proposed legislation is the draft Electronic Presentation of Instruments (Evidence of Payment and Compensation for Loss) Regulations 2018.

In terms of the use of cheques as evidence of payment the Government has amended its consultation proposals so that upon request, paying banks will have to provide a copy of the cheque together with:

  • confirmation of the decision of the banker that the payment should be made (including automated decisions) and the date that the decision was made (or the date upon which the automated decision was made);
  • the value of the payment made;
  • the sort code and account number of the paying customer (drawer of the cheque); and
  • any reference number allocated by the banker authorised to collect payment of the instrument (used to identify the payment instrument).

In terms of compensation the Government states that it recognises that the current system, where Cheque & Credit’s scheme rules stipulate which party must compensate a customer in which scenario, has generally worked well to date but that it remains of the view that legislation is necessary to ensure that customers are not left out of pocket given that ICS represents a significant change to the way cheques are processed. The Government has amended the draft legislation to clarify that compensation only applies where the customer has not already been compensated (for example via the ICS scheme rules). The Government has also clarified in the draft Explanatory Memorandum that the proposed legislation is not intended to override existing scheme rules.

The Government also amended the draft legislation so that shorter time periods are expressed in working days rather than calendar days (defined as periods under 56 days).

The aim of the draft legislation is to ensure that the ICS, which will clear all cheques by October 2018, has no detrimental impact on the existing position of cheque users.