Banks Change Way Returned Direct Debit Charges Work

Seven of the UK’s largest banks have changed the way that they charge people for returned direct debit payment, which could save customers a lot of money. It is believed that the unnecessary charges could be costing customers as much as £200million each year.

Until now banks often process direct debits in the early hours of the morning, sometimes soon after midnight. If a customer’s salary or other payment is processed into the bank after the direct debit has occurred the customer would be charged by the banks for a lack of funds, despite the funds being in the account on the same day.

Now what the 7 banks that have changed are doing is that if a payment fails, rather than immediately issuing charges and returning the direct debit as unpaid, it will retry the payment later on in the day to see if additional funds have cleared into the bank. This should also mean that people should be able to deposit cash on the same day to cover the cost of the payment to insure that the payment is processed on time.

Some of the banks that have so far adopted the new payment include Barclays, The Co-operative, HSBC, Nationwide, RBS and Santander. The FCA said that Lloyds TSB operates a same day retry process on some of its transactions, but is updating its systems to make the new process be applied to all transactions in the future. It is worth noting that for these types of charges you can reclaim the money back from Lloyds TSB until their new system is in place.

The banks have also said that time deadlines for funds to be present in a bank will be a lot clearer for customers.

Clive Adamson, director of supervision at the FCA, said that ‘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.”

The changes have been made as part of an industry agreement rather that the rules being changed.

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