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New rules that aim to protect consumers by extending the maximum delay for suspicious payments by 72 hours have been given the go-ahead by the UK government, despite concerns from industry.
Payment service providers (PSPs) will be given enhanced powers to delay and investigate payments that are suspected of being fraudulent.
New laws proposed by the Labour government extend the time limit in instances where there are reasonable grounds to suspect a payment is fraudulent and more time is needed for the firms to investigate.
As it stands, PSPs are required to process or refuse a payment by the end of the next business day, so the new rules triple the time available to them.
The government is hoping that this will give firms more time to intervene in instances of fraud, considering the impact on victims and the estimated £460m lost to fraud in 2023 alone.
PSPs that have reasonable grounds to suspect a payment is fraudulent will need to inform customers when the payment is being delayed, and they will also need to explain what the customer needs to do to unblock the payment.
The need for evidence to trigger a delay is intended to help protect individuals and businesses from unnecessary payment delays, and PSPs will be required to compensate customers for any interest or late payment fees they incur as a result of delays.
Consumer protection
The government is adamant that this move will better protect consumers in the UK, considering the continuous issue with authorised push payment (APP) scams.
“Hundreds of millions of pounds are lost to scammers each year, targeting vulnerable communities and ruining the lives of ordinary people,” said Tulip Siddiq, the economic secretary to the Treasury.
Siddiq added that it is the government’s responsibility to “protect these people better, which is why we are giving banks more time to investigate suspicious payments and break the criminal spell that scammers weave”.
The government’s fraud minister, Lord David Hanson, said that it is something that can “devastate lives”.
“Anyone can be affected,” he said. “That’s why measures like this are so crucial to provide banks the investigative powers they need to better protect customers from this appalling crime.”
Tackling a widespread problem
Fraud accounts for more than a third of all crime perpetrated in England and Wales, making it the most prevalent form of crime commitment in the country.
This prevalence has been driven by a growing number of purchase scams and the emergence of so-called "romance scams", where victims target vulnerable people and trick them into transferring large amounts of money by pretending to be interested in a romantic relationship.
The widespread nature of the problem has meant that, publicly, representatives of the banking industry and consumers are welcoming of the move.
“This is a positive step in the fight against fraud,” said Rocio Concha, policy and advocacy director at Which?.
“While it should not affect the vast majority of everyday payments, it’s important that banks can delay a bank transfer and take action if they think a customer is being targeted by a scam.”
However, Concha cautioned that the measures “should be used in a careful and targeted way”.
“Financial firms of all sizes should also ensure they share intelligence and work with the police and other authorities to shut down accounts used for fraud and pursue the criminals behind them,” she said.
Ben Donaldson, UK Finance managing director of economic crime, praised the move, saying that the organisation “has long called for firms to be allowed to delay payments in high-risk cases where fraud is suspected, and we are delighted to see proposed new laws supporting this”.
Donaldson suggested that this could give PSPs time to get in touch with customers and give them the advice and support they need to avoid being coerced by the criminals who want to steal their money.
“This could potentially limit the psychological harms that these awful crimes can cause and stop money getting into the hands of criminals.”
However, not all are positive about the change, and sources in the payment initiation service provider (PISP) space have branded it “anti-growth” as it will lead to more friction in payments.
Others have expressed concern about vulnerable customers being unable to make payments on time, although this should be ironed out by the rules around reimbursement of late fees.
