The new regulator has secured a commitment from seven high street banks to use a “retry system” to avoid penalty charges when processing direct debits and standing orders.
The Financial Conduct Authority (FCA) has reached an agreement with Barclays, The Co-operative, Nationwide, HSBC, RBS Group, Santander and National Australia Group, which owns Clydesdale and Yorkshire Banks, to adopt the same day “retry system”.
According to the FCA, the UK’s Faster Payments service means that payments in and out of bank accounts typically take a couple of seconds and are usually processed within two hours.
Banks generally process incoming and outgoing payments, including direct debits, standing orders and future dated payment bills, early in the morning which means that when customers make a deposit or receive their salary after this process they can be left with an unpaid item fee.
The regulator has estimated that penalty fees through the old system costs consumers around £200m a year.
Under the new system, 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, which will allow deposits to clear and the outgoing payment to be made.
The banks have also pledged to inform 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: “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.”
Lloyds Banking Group operates a same day retry process on many of its transactions but has said it will update its systems to ensure it is used on all transactions.
But customers will be able to claim a refund for related late payment charges.