The Financial Conduct Authority (FCA) has come to an agreement with seven of the UK’s biggest high street banks that will see them use a same day ‘retry system’ when processing Direct Debits, standing orders and future dated bill payments.
The new approach has been adopted by Barclays, The Co-operative, HSBC, Nationwide, RBS Group, Santander and National Australia Group (which owns Clydesdale and Yorkshire banks) and will improve the experience of everyday banking for millions of consumers, the regulator said.
Lloyds Banking Group currently operates a same day retry process on many of its transactions, but is updating its systems to ensure it is used for all transactions. Until this occurs customers will be able to claim a refund for related late payment charges.
Currently, the UK’s Faster Payments Service means that payments in and out of bank accounts typically take a couple of seconds to process, and certainly within two hours.
However, banks generally process incoming and outgoing payments (such as Direct Debits, credits and standing orders) early in the morning. This means that when a customer makes a deposit or receives their salary after this process they can be left with an unpaid item fee. It is estimated that these penalty fees incurred through the old system cost customers as much as £200m a year.
Now, with the retry process in place, if the deposited money is not present when a debit is being taken, the bank will retry the payment in the afternoon before finalising the transaction. This will allow deposits to clear and the outgoing payment to be made.
In addition, the banks will now also be clear with their customers about the time by which money must be in their account to meet outgoing payments.
Clive Adamson, the FCA’s director of supervision, said: “It is little things like this that have a big impact on customers’ everyday banking experience, even though many people won’t be familiar with the process. This is a small adjustment, but one that will make a big difference.
“We are committed to putting customer interests at the heart of everything the FCA does, and it’s encouraging that the banks are also beginning to take this approach. There are no new rules here – this is an agreement with the industry; working together for the benefit of consumers can often be more effective than writing new rules, and it certainly delivers results more quickly.
“This is part of a wider focus by the FCA to ensure consumers get a better deal from everyday banking. This summer we will also be publishing work looking into how simple it is to cancel recurring transactions.”
Adam Phillips, the chair of the Consumer Panel, wholeheartedly welcomed the FCA initiative.
He said: “In these difficult economic times this measure will particularly benefit those that most need it.
“We hope that the banking industry will continue to work with the FCA on initiatives that put treating consumers fairly at the heart of their business models.”