FCA secures commitment from high street banks to use a ‘retry system’ when processing payments to stop unnecessary penalty charges

The Financial Conduct Authority (FCA) has reached 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.

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; the system is a fast and flexible way of moving money between accounts and paying bills.

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, commented:

“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*.”

The Payments Council and the FCA are working together to help improve the minimum service level for customers across all banks and building societies that offer standing order, Direct Debit or future dated payment facilities.

The Payments Council is currently conducting detailed research and analysis to define the challenges faced by its members and what kind of detriment is being experienced by customers. This will help create a range of improvements that can be applied across the entire industry during 2014.


*recurring transactions are sometimes also referred to as recurring payments or continuous payment authorities.

Notes for editors

  1. In the FCA’s 2013/14 Business Plan (page 20), the regulator set out a number of everyday banking issues upon which it will focus this year.
  2. The Faster Payments Service is overseen by the Payments Council. The Payments Council is the organisation that sets the strategy for UK payments. It was set up by the payments industry in 2007 to ensure that UK payment systems and services meet the need of payment service providers, users and the wider economy. More information on the Faster Payments system can be found online.
  3. Currently, the UK's Faster Payments Service means payments in and out of bank accounts are typically processed in a few seconds, with a minimum requirement for the recipient's account to be credited within two business hours. Direct Debits are processed through Bacs Payment Schemes, with debit and credit of payment happening simultaneously. Both systems are fast and flexible ways of moving money between accounts and paying bills.
  4. On the 1 April 2013 the Financial Conduct Authority (FCA) became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
  5. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers
  6. Find out more information about the FCA, as well as how it is different to the PRA.