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UK Finance develops model clauses for variable recurring payments

UK Finance develops model clauses for variable recurring payments

UK Finance has teamed up with law firm Addleshaw Goddard to put together a set of model clauses that bank account providers and PSPs can use in variable recurring payments (VRPs).

VRPs are a form of payments instruction that allows customers to authorise registered payment service providers to initiate payments from their bank account on an ongoing basis, where the timing or the amount might vary, within agreed limits.

Financial regulators in the UK have agreed plans for a Phase 1 roll out of non-sweeping VRPs by the third quarter of 2024.

To support the development of VRPs for commercial applications, UK Finance and Addleshaw Goddard have put together a set of model contractual terms that can be used in arrangements between account providers and PSPs.

The model clauses, they say, will help with driving competition, increasing efficiencies by removing some of the transaction cost of bilateral negotiations between payment providers, and ensuring banking customers have a consistent experience.

Use of the open source model clauses is "entirely voluntary", says UK Finance, but the organisation is encouraging the industry to use them where possible.

Jana Mackintosh, MD, payments, innovation and resilience. UK Finance, says: "The thought leadership and model clauses we have developed with different types of firms including banks, fintech and schemes are a significant milestone in the progression of Variable Recurring Payments and a stepping-stone to a wider Multilateral Agreement."

Comments: (2)

A Finextra member
A Finextra member 23 April, 2024, 09:27Be the first to give this comment the thumbs up 0 likes

All this sounds good, but misses out on an important feature in the payments legislation: If a bank (or ASPSP as the regulators say) does not implement strong 2 factor authentication along the lines in PSD2 for a payment order, but instead allows the account holder to  transfer monies out of the account without this by using one of the PSD2 listed exceptions, the risk of thge payment is on the ASPSP/bank and the payer/account holder can ask for an immediate refund at any time. The payer ASPSP/bank is not entitled to ask for a corresponding refund from the payee ASPSP/bank and the payee is not under obligation to pay back! Why would ASPSP:s/banks adopt this model if they are not paid by somebody for this extra risk. Payee ASPSP/banks that want to receive the convenient payment on behalf of normally a corporate payee, do not pay any "interchange lookalike" fee to the payer ASPSP/bankfor this and such fees are actually prohibited in the legislation for account-account payments. The UK Finance should therefore also propose corresponding changes to the risk allocation of "non 2 factor" autheticated payments and make the payee ASPSP/bank or third party payment initiator  liable to pay back to the payer ASPSP/bank when a payer asks for a refund. 

A Finextra member
A Finextra member 23 April, 2024, 10:17Be the first to give this comment the thumbs up 0 likes

Variable Amount Direct Debits (VADD) have been around for 40 years or more and work perfectly.