Small Business, Enterprise and Employment Bill
(Limited Text - Ministerial Extracts only)
Read Full debate16:16 - Division on Amendment 1 - Ayes: 187 / Noes: 256 - Amendment 1 disagreed.
Lord Newby
Lord Newby (LD)
My Lords, Amendments 7 to 19 and 84 make two technical but essential changes to the cheque-clearing provisions relating, first, to consistency in the treatment of cheque and non-cheque paper instruments and, secondly, to the continuation of current statutory protections for the paying customer.
Amendments 7 to 9 and 19 are designed to ensure that non-cheque instruments, such as warrants and travellers’ cheques, are treated in the same way as traditional paper cheques under the new provisions for electronic presentment. Under the new legislation for cheque imaging, as currently drafted, it would be possible for corporate customers and other large non-bank customers to make arrangements to submit cheque images directly to the central switch that clears cheque transactions for all member banks, rather than their bank submitting images on their behalf. This would make the clearing process more efficient. However, the current drafting means that this option will not be available for non-cheque paper instruments that are not drawn on a bank.
The Government’s policy intention is to provide for a system that treats cheques and non-cheques in the same way, and therefore it is necessary to make these amendments to ensure the equal treatment of non-cheque instruments in all circumstances of presentment. On the basis of current practice, this approach does not present any difficulties. However, it is possible that the position could change in the future—for example, as a result of the development of new types of instruments that do not currently exist. For this reason, Amendment 9 confers a power on the Treasury to restrict the circumstances in which presentment by image is permissible. This power is intended to be used to deal only with any unforeseen issues that may arise in the future and could not be used to have any retrospective effect on instruments that have already been presented by image. It is subject to the affirmative procedure.
Amendment 12 is intended to ensure the continuation of current statutory protections for the paying customer. Under the existing cheque clearing system, a customer who makes a payment with a cheque can request the original cheque to be stamped “paid”, which stands as prima facie evidence that the payee has received the amount payable. This provides a protection for the payer in situations where the payee claims that they have not received payment.
The legislation for cheque imaging does not provide for an equivalent protection when cheques or other paper instruments are paid in by electronic image and the physical instrument does not end up in the possession of a bank. It has become clear that the loss of this protection would remove a useful service currently relied upon by some cheque users. Therefore, it is necessary to make an amendment to preserve this type of protection for the paying customer under electronic cheque clearing. This amendment will confer a power on the Treasury to make appropriate provision in regulations, subject to the affirmative procedure, because the precise nature of the evidence to be provided to the payer may depend on the technical design of the clearing system. The regulations will be able to set out the nature of the evidence to be provided to the payer and the effect of that evidence, including the weight to be given to such evidence.
Amendments 10, 11, 13 to 18 and 84 are consequential amendments dealing with the procedure for making regulations under Amendments 9 and 12, and they provide minor and technical clarifications of the drafting.
To conclude, these amendments will ensure that the provisions for electronic presentment treat cheques and non-cheques consistently and that existing customer protections continue under the new system. I beg to move.
Lord Stevenson of Balmacara
My Lords, I welcome the contribution to this debate by the noble Lord, Lord Newby, and for his helpful explanation of the matters that are being considered by this large group of amendments. We had a fair bash at this in Committee, so I was a little surprised to see so many additional regulations on this matter, particularly as this is an attempt to simplify rather than make more complicated an already rather obscure area of financial transactions. Indeed, in some senses these amendments seem to take us back rather than forward in that they seem to provide a bolstering of a paper-based or evidence-based solution to a number of things that one would have hoped could have moved on to an electronic age. But I am sure that the intention behind them is entirely correct, and we support the general direction of the move.
I wanted to pick up on one point. In the wording of the amendments on the Marshalled List there is reference to the power for the Treasury to make regulations, but it does not specify how they are to be exercised in practice. I agree that the number of occasions will be limited, but the Minister mentioned that the first group would be subject to the affirmative procedure and did not say anything about the second or third groups and whether they would be subject to the negative or the affirmative procedures. Could he clarify that for me please before we leave this point? If it is too difficult to do now, I am very happy to have that in correspondence, but we have no objection to this in general.
Lord Newby
My Lords, I think I said that the second group would be subject to affirmative resolution. My understanding is that the two issues that we are debating will both be subject to the affirmative procedure. If I am mistaken, of course I will write to the noble Lord.
Lord Newby