Government proposed to regulate banking industry's consumer payments body

In a speech to the Building Societies Association, Treasury Minister Mark Hoban said that regulation would make the Payments Council "even more responsive, innovative and competitive."

The Payments Council was created in 2007 to oversee and develop payment services in the UK. Its board consists of 15 voting directors, of whom 11 are appointed by the banking industry.

An influential committee of MPs first proposed that the industry-dominated body be formally regulated in August after an announcement that it would seek to abolish cheques by 2018 met with protest from MPs, consumer groups and charities.

The Payments Council ultimately backtracked on the plans after an inquiry by the Treasury Committee showed that the plans "did not have the confidence or support of the public, Parliament or the Government", according to committee chair Andrew Tyrie.

In its report, the Treasury Committee said that the Payments Council should no longer have the "unfettered power" to decide on payment mechanisms that could directly affect millions of people.

It added that the Payments Council should examine the possibility of reintroducing cheque guarantee cards, which were withdrawn in June.

"The Payments Council is an industry-dominated body with no effective accountability. It should not have unfettered power to take decisions on matters, such as the future of cheques, or other issues that are of vital importance to millions of people," Tyrie said.

He also proposed that the board of the Payments Council have greater consumer representation, including plans to give two of the four independent members of the board the right of veto over a decision of the Council. At present, all four independent members must be in agreement before the veto can be used.

However, Hoban said the Government intended to "go beyond" the Committee's recommendations.

"The future of the cheque is one example of how things can easily and quickly go wrong – where decisions taken by the industry can have enormous impacts on consumers," he said in his speech.

"We will consult in the New Year on how the regulatory framework for payment systems can be enhanced."

The Payments Council is currently running its own consultation to review its governance arrangements. Its chief executive, Adrian Kamellard, said in a statement that scrapping its plans to close the central cheque clearing system was taken to "reflect the needs of customers and everyone who uses payments".

"The Payments Council's raison d'être is to ensure that UK citizens, businesses and other organisations have access to a broad range of modern and efficient payment methods that meet their needs, and to ensure that they are confident in using them. Therefore, it is good to see Government focus on what we do," he said.