Previously if these direct debit, standing order or future-dated bill payments went through without the money being cleared, an automatic fine of around £20 would be issued. These fines total around £200 million a year.
The Financial Conduct Authority (FCA) has also agreed to look into the continuous payments system and how difficult it is for customers to cancel these kinds of payments.
The retry system
At the moment automatic payments are taken out of bank accounts first thing in the morning. But this can cause problems if money needs to come out of the account on the same day and it hasn't yet cleared.
To make it easier for customers, seven UK banks and one building society have agreed to the retry system whereby they retry the payment later in the day if it fails the first time.
The participating banks and building societies are Barclays, The Co-operative, HSBC, Nationwide, RBS Group, Santander and National Australia Bank (which owns Clydesdale and Yorkshire banks).
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The continuous payments system, which covers any kind of recurring transactions, will also be looked into. These are often used for gym memberships and take money out of a customer's account without prior warning.
There have been several recent reports of payday loan companies withdrawing money repeatedly over one day from customers without getting permission first. This leaves the borrower with no money for basic necessities and the regulator is to investigate how fair and legal this current system is. A report will be published in the summer with the findings.
For more read Continuous Payment Authority: your rights