New 'retry system' to spell the end for bouncing cheques?
Good news is on the horizon for those who get stung by missed payment fees- the charge slapped on when a payment ‘bounces’ in your account owing to lack of funds. Of course, sometimes you don’t know whether you’re in the frying pan or the fire with these things, because your bank might save you a missed payment fee by paying the bill, only to charge you extortionate unauthorised overdraft fees.
Anyway, a new retry process will become live across the banking sector on Monday 1 September 2014 which will help customers avoid late payment charges on their account. Following a successful trial, from now on, when a customer’s Standing Order, Direct Debit or Future-Dated Payment ‘bounces’ because of insufficient funds in the account, the payment will be processed again by their bank or building society, later the same day.
You might wonder whether this is just prolonging the agony, after all, if you’re broke at 9am, you’re probably going to be broke after lunch. However, the point behind the retry is to allow customers the opportunity to pay cleared funds into their account, which will allow the ‘retried’ payment to be successfully processed the second time around. Everyone’s a winner!
All participating banks and building societies will give customers until at least 2pm to pay cleared funds into their account, but some banks might offer a cut-off time later than 2pm regardless of the fact that more than eight out of ten people thought that 2pm was an acceptable time, according to Payments Council research.
Clive Adamson, director of supervision at the FCA, said:
“We are pleased to see this extension to the retry system, first introduced in April 2013, helping more customers to avoid penalty charges. We estimated that under the old system, people were incurring £200m in penalties so this change can have a big impact on consumers’ banking experience.
But don’t worry that this is the end of the line for the rubber cheque- the retry process only relates to payments that are pre-notified (i.e. Standing Orders, Direct Debits and Future-Dated Payments), so cheques are not included in the official agreement with the FCA. However, banks and building societies can compete on this - so some may choose to include cheques as an added extra to boost the appeal of their accounts.
The banks signed up to the agreement are: