The UK's Office of Fair Trading is calling for the elimination of the free float used by banks during clearing of electronic payments.
In a response to the ongoing review of the UK Banking Codes by Professor Elaine Kempson of Bristol University, the competition watchdog says that consumers should benefit from float and have clearer account information.
The OFT is calling for customers to continue to receive interest on interest-bearing accounts until the money is credited to the payee's account. Alternatively, if the customer making the payment is overdrawn or will become overdrawn as a consequence of making the transfer, they should not be charged overdraft interest on the amount of the payment for the appropriate period.
In a report issued last May following a three-month investigation into the clearing system, the OFT estimated that UK consumers were losing £30 million annually in lost interest payments due to delays in clearing standing orders, Internet and telephone banking payments.
John Vickers, OFT Chairman, says: "Self-regulation through the Banking Codes needs improvement. Customers, not just the banks, should get some benefit from the float. And customers should get clearer information to help guide their choices about banking services."
The consultation period on the Banking Codes formally closes at the end of this month, and Professor Kempson is expected to report back in September. The revised Codes will take effect from 1 March 2005.