The UK Treasury is set to empower banks with the ability to delay payments by up to 72 hours in order to investigate suspected fraud or scams. Under the new legislation, payment service providers (PSPs) must inform payers of such delays as soon as possible, provide a reason, and request any necessary information or actions from the payer to facilitate a decision on whether to process the payment.
This draft regulation is intended to amend the 2017 Payment Services Regulations, which currently require PSPs to execute payments within a specified time frame. The move comes in light of recent findings indicating that UK bank fraud losses exceeded £1 billion last year, with Authorized Push Payment (APP) scams accounting for a significant portion of this figure. New APP reimbursement legislation will come into effect on October 7, adjusting the reimbursement limit to £85,000.
Tulip Siddiq, Economic Secretary to the UK Treasury, stated, “Hundreds of millions of pounds are lost to scammers each year, targeting vulnerable communities and ruining the lives of ordinary people. We need to protect these individuals better, which is why we are allowing banks more time to investigate suspicious payments and disrupt the operations of scammers.”
Lord Sir David Hanson, Minister of State with Responsibility for Fraud, noted that fraud constitutes over a third of all crimes in England and Wales. He emphasized that the new rules would aid in safeguarding individuals from various scams by permitting banks an additional 72 hours for investigation, as opposed to the current next-business-day requirement.
Ben Donaldson, managing director of economic crime at UK Finance, remarked that this initiative could enable PSPs to reach out to customers, offering them advice and support to prevent manipulation by criminals. The requirement for banks to inform customers of payment delays and the need for evidence to justify such delays are aimed at reducing unnecessary interruptions while ensuring customer compensation for any incurred fees.
Jack Kerr, director at Appdome, highlighted that while freezing bank accounts protects consumers, it can severely impact user experience, especially for vital payments like mortgages. He urged financial institutions to adopt automated fraud detection systems that function in real-time. This proactive approach will help minimize account freezes and maintain seamless access to funds for consumers. Additionally, Kerr emphasized the importance of securing mobile banking apps, as consumer expectations for fraud protection continue to rise.