The UK banking industry has introduced a 'retry' process that will give customers a second chance to avoid bounced payments and their associated charges.
From 1 September, 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.
This means that customers will get until at least 2pm the same day to pay cleared funds into their account, which will allow the 'retried' payment to be successfully processed the second time around so that charges are avoided.
Seven of the UK's biggest banks have had a retry system in place since last summer after reaching a deal with the Financial Conduct Authority. Now, under the Payments Council umbrella, a total of 29 firms are onboard.
The new approach deals with a dislocation between faster payments processing and legacy back office infrastructure. The UK's Faster Payments Service means that payments in and out of bank accounts typically take a couple of seconds to process.
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 £200 million a year.
Jemma Smith, director, communications and education, Payments Council, says: "The introduction of the retry process helps to give customers more control when it comes to meeting their financial commitments. This new process acts like a safety net for those situations when you might not have enough money in your account, giving you a chance to put things right by paying in cleared funds."