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The new consumer watchdog for the banking sector, the Financial Conduct Authority (FCA) has reached an agreement with seven of the UK's largest banks and building societies which will undoubtedly help consumers avoid bank charges from failed direct debits.
 
In the unprecedented move, Barclays, The Co-operative, HSBC, Nationwide, RBS Group, Santander and National Australia Group will begin a process whereby direct debits, Standing Orders and future dated bill payments will be retried later in the day if they initially fail due to lack of funds.  Lloyd's Banking Group advised that they already operate a similar system for most payments, and are working to extend the scheme to all transactions.

The FCA have pressed for the retry-later process following the introduction of the Faster Payments system whereby payments between accounts happen in near real time.  
 
Historically payments into accounts occurred shortly after midnight as part of a batch process followed by direct debits and Standing Orders.  As Faster Payments can be credited to an account at any point in the day, it is possible that an expected payment into the account is applied after the automated payments out have been processed.  The introduction of the new retry process ensures that payments received later in the day are taken into account when making the decision whether or not to honour automated payments out of the account.
 
For a Direct Debit Originator, those that have their own Service User Number, this is great news as there should be an increased number of successful payments as payments received later in the day are accounted for in the decision whether to pay a direct debit or not.  It is, however, unclear at this point whether or not ARUDD (unpaid) reports will be supplied at a later date to Direct Debit Originators for those payments that fail a second time after being subjected to the retrying process.
 
The FCA and Payments Council are continuing to work in close co-operation to help put together a minimum service standards framework across all banks and building societies that offer direct debits, Standing Orders and future dated payments to consumers.