April 15, 2011 - Anonymous
Small firms that accept cheque payments will have no protection if cheques bounce after the guarantee scheme is scrapped in June, the Federation of Small Businesses (FSB) has warned, writes Kate Horstead.
Currently, the cheque guarantee card scheme means that up to £250 is guaranteed to be paid by the bank if the cheque bounces. On 30 June 2011 the guarantee scheme will be scrapped, although cheques are not due to be phased out until 2018.
The FSB’s warning comes after a survey from retail payments firm WorldPay found that more than three-quarters of small firms are unaware that the guarantee scheme is being scrapped, and three out of five have made no alternative payment plans.
FSB spokeswoman, Sara Lee, said that the change would deter a lot of firms from accepting cheques.
“Many service firms still rely a lot on cheques – for example, tradespeople and holiday lettings firms,” she said. “Card payment machines can be quite expensive, and tradespeople who visit people’s homes aren’t going to carry card terminals around with them.”
Lee added that most businesses know that the cheque is being phased out, but not that the guarantee scheme is being scrapped this year. “Firms need to make sure they have systems in place where they can request payment by a different method or ensure they’ve got a way of getting back in touch if the cheque bounces,” she said.
However, figures from the Payments Council show that only 7 per cent of the 1.4 billion cheques written in 2010 were guaranteed under the scheme.
WorldPay chief commercial officer, Matt Rowsell, said that businesses should look at other payment options. “There are options in place for businesses of all sizes and types, and it’s important for businesses to start reviewing these so they can be on the front foot and benefit from the many advantages that come as a result of using electronic payments,” he said.