Faster cheque clearing on the way

The time cheques take to clear could be set to fall after the government announced plans today to make payment systems more competitive.

The Treasury announced that banking payment services, used for making payments by card, cheque and direct debit, are to be regulated by the office of fair trading (OFT) in a bid to increase competition forcing them to become faster and cheaper.

Banking payment systems are unregulated and are run by companies which are owned by groups of banks and building societies.

Small businesses and retailers pay for every payment they make or receive through the system, and consumers pay for using them through account charges.

Under the regulation of the OFT, banks and building societies will be forced to make it clear what their charges and transaction times are.

Chief secretary of the Treasury Andrew Smith said: "Systems for delivering payment services such as credit cards, cheques and direct debits affect every user of the banking system, whether personal customers or businesses.

"This government is determined to put in place means to encourage competition in these services in the interests of all users."

The Treasury said it would introduce the legislation making the OFT regulator as soon as Parliamentary time allowed.

Today's announcement comes in response to recommendations made by Don Cruickshank, chairman of the London Stock Exchange, in his report on competition in UK banking.