CMA clarifies definition of VRPs for sweeping

Author – Jack Williams, Payment Services & Financial Crime Compliance Manager

What has happened?

In March 2022, the Competition and Markets Authority clarified what Sweeping can and cannot be used for when it is introduced in July 2022.

What did the CMA’s announcement focus on?

The CMA, in a letter to the Open Banking Implementation Entity (OBIE) in July 2021, gave their approval for the roll out of Variable Recurring Payments (VRPs) as a mechanism for achieving Sweeping. The introduction of Variable Recurring Payments would permit authorized payment providers – such as Payment Initiation Services Providers (PISPs) to connect to their customers’ bank accounts to make a series of payments on their behalf, within agreed parameters. For instance, the account-holding customer would consent to the maximum limit of funds that would be transferred at the agreed frequency, as well as an end date for the transactions. The CMA’s intention in mandating Variable Recurring Payments was the enabling of Sweeping, which is the automatic transfer of funds between a customer’s own accounts.

However, within its latest letter, the CMA has sought to clarify confusion among market participants on the scope of Sweeping and the purposes for which it can be used. The CMA has now emphasized that Sweeping may only be used by authorized payment providers to address the problems identified in its 2017 Retail Banking Market Investigation.

The CMA has clarified that Sweeping may be used for the following express purposes:

• Transferring money between two current accounts, to prevent the customer from falling into overdraft on one of the accounts
• Transferring money to destination accounts which are used for unbundling overdrafts from a current account and other alternate forms of credit
• Transferring money to an account used for loan repayments, as part of a service that provides alternative forms of credit to an overdraft
• Transferring money to a credit card account
• Transferring money to a cash savings account that is capable of paying interest

On the other hand, Sweeping cannot, according to the CMA, be used for making e-commerce purchases, moving money to accounts used to purchase cryptocurrency and other similar assets, moving money to use online gambling and gaming services, moving money to accounts used for foreign exchange or international money transfer services or moving money to use investment products, including pensions.

How can we help you with Variable Recurring Payments?

If you’d like to know more about how we can help you with your Variable Recurring Payments arrangements, or with any other regulatory compliance issues, our specialist team is here to help.

Contact us today on 0207 436 0630 – or email info@thistleinitiatives.co.uk.