In an effort to curb fraud, UK banks will soon have the power to delay large payments, enhancing protection for consumers.
- Starting on 7 October, banks will be able to hold transactions for up to four days if fraud is suspected, extending the current 24-hour limit.
- This change accompanies a new regime ensuring banks reimburse most victims of Authorised Push Payment (APP) fraud.
- Critiques highlight concerns over potential delays in processes like home purchases despite the intended fraud prevention benefits.
- New guidelines specify conditions under which victims can be denied refunds, aiming to increase protection for vulnerable customers.
In an effort to curb fraud, UK banks will soon have the power to delay large payments, enhancing protection for consumers. The updated measures will empower banks to hold transactions for up to four days under suspicion of fraud, significantly extending the current 24-hour window. This legislative change is part of a broader effort to combat Authorised Push Payment (APP) fraud, a scheme that cost consumers £460 million last year.
The new regulations from the Payment Systems Regulator (PSR) now require banks to reimburse nearly all victims of APP fraud, commencing 7 October. This legal framework ensures that consumers are better safeguarded against scams, such as romance fraud and fake purchase scams. However, this does not apply to cases where customers acted with gross negligence, ignored bank warnings, delayed notifying the bank of fraud, or refused to cooperate with the bank or police.
Despite the protective intentions of these measures, some legal experts express concerns over increased bureaucracy. Particularly, this could impact sectors like real estate transactions, where holding funds can disrupt the buying process. Gareth Richards, from the Society of Licensed Conveyancers, commented on this overlap, stressing that existing measures might already be adequate to identify suspicious activities.
Victims’ rights and protections are strengthened under these changes, but there is a balance to maintain concerning transaction fluidity. Vulnerable customers will receive additional protections, ensuring banks have limited grounds to deny refunds. This adjustment aligns with the efforts to bring uniformity and fairness in handling fraud cases, marking a significant shift from the previous voluntary Contingent Reimbursement Model (CRM) that saw a rise in reimbursement rates over recent years.
Furthermore, more than 480 organisations have registered under this scheme, aligning with Pay.UK, the overseer of these transactions. This initial phase will be financed through a levy on Faster Payments system transactions. Banks had until 20 August to comply with these prerequisites, ensuring readiness for this transition.
These changes mark a significant step in enhancing consumer protection against fraud, though they bring challenges that must be navigated carefully.
