Banks forced to speed up payments

BANKS are finally being forced to speed up electronic bill payments, ending a rip-off which generates millions in extra profits every year. However, with the banks fighting tooth and nail to preserve their bloated profits, the change will not be in place until the end of 2007 at the earliest.

Consumer groups criticised the initiative as too little, too late. The advent of computer technology should have delivered immediate transfer of payments between accounts years ago. But banks have continued to delay processing electronic payments in a way that has worked to fill their coffers at the expense of customers.

Someone contacting their bank by phone or the internet to pay a credit card or utility bill on a Monday will find that the money disappears immediately but does not arrive for two days. This 'floating' cash is estimated at £50m a year, and the banks earn interest on it. Perhaps more importantly, the delays can mean that customers miss deadlines to pay credit card bills, so generating penalty charges.

Details of the reformed system will be announced by the Office of Fair Trading tomorrow. In future, customers will find it much easier to pay their credit card bills and other payments on time.

A quicker electronic transfer system was recommended following a Government inquiry in 2000 but the banks have continually managed to kick the issue into the long grass.

Five years ago, the Treasury inquiry headed by Don Cruickshank called for a banking regulator - called PayCom - to be set up to push through faster financial processing.

Cruickshank said the watchdog should crack down on long transaction times and other hidden charges on using credit and debit cards which lead to banks raking in an estimated £400m a year in excess profits.