Banking regulation
What's new?
From 1 November the FSA will regulate the way banks and building societies do business with their customers (this used to be done by the Banking Code Standards Board).
The rules governing the way payments, for example Direct Debits, money transfers (either to another account in the UK or overseas) and many kinds of debit and credit card transactions are made also change under the Payment Services Regulations.
Payments where your money goes straight to the person receiving it for a service they have provided and not via a third party will not be affected by the regulations, for example paying bills by cash.
Who is affected by this?
We all are, especially if you have a bank account, use a debit or credit card, or a prepaid card to buy things in shops or online, or transfer money abroad. Direct Debits are also affected.
You may have received a leaflet from your bank or building society telling you about changes to your terms and conditions as a result of the Payment Services Regulations, including new information about the way your bank or building society will do business with you.
What are the main bank account features?
- Greater transparency – all the information you need up front.
- Advance notification of changes – on instant-access savings accounts and current accounts you must be notified two months ahead of any disadvantageous interest changes.
- Speeding up payments – transferring money electronically from one account to another person’s account, including the payment of bills, will have to be completed by close of business the next day. However, until 1 January 2012 this can be extended to the third working day, as long as this has been agreed between you and the payment service provider. In most cases this extension is likely to be in the terms and conditions. There are also exceptions where currency conversions are involved.
- Earning interest – for current and instant-access accounts that pay interest, you will begin receiving interest on money transferred into your account from the moment the bank receives it.
- Unauthorised transactions – if you think a transaction on your account was not authorised by you, the bank or building society will need to prove either that you authorised it, or that you either deliberately or carelessly allowed someone else to get hold of your password or PIN. Just because your PIN was used will not necessarily be enough to prove that this is the case. Unless the bank or building society can prove this, it will have to refund your account immediately. If it can show that it needs to investigate the claim, then that investigation must be done quickly (within a few days).
For more information see Bank accounts or get a copy of our printed Your bank account guide from Free printed guides.
What are the main benefits if I’m sending money overseas?
- Information up front – firms sending money overseas (money remitters) will have to provide more information to you before you commit to using their services, for example how long the transfer will take, how much it will cost, details of any exchange rate, and if they are regulated by us.
- Protecting your money – larger payment services providers (for example firms that carry out transactions of more than €3 million per month on average) such as money remitters and credit card issuers have to protect your money (known as safeguarding). It must be kept separate from their own funds, so that if the firm went bust your money would be safe. Smaller operators may also choose to safeguard customers’ funds. If you are dealing with one of these firms it is a good idea to ask the firm whether they are safeguarding customers’ funds.
- Right to complain to the Financial Ombudsman Service (Ombudsman) – you will have the right to complain to the Ombudsman if you are not satisfied with the service provided by the money remitter. Until now the Ombudsman has not covered these services.
For more information on money transfers see Sending money overseas.
Banks and building societies do not have to safeguard funds because your money is protected by the Financial Services Compensation Scheme (FSCS) – see Compensation.
More information
Under the new regulations, UK payment service providers other than banks, building societies and e-money issuers will need to be authorised or registered by us as a ‘payment institution’ by 30 April 2011. There are transitional periods allowing firms to delay registration until 25 December 2010 and to delay becoming authorised until 1 May 2011. You can look at the FSA Register to check whether a firm is authorised or registered as a ‘payment institution’, To find out what to do if a payment services firm is not on the Register, see Check our Register.
Regulation of overdrafts and credit card lending will continue to be regulated by the Office of Fair Trading under the Consumer Credit Act.
