Banks in the UK are set to receive new powers to delay and investigate payments they suspect may be fraudulent, in a move designed to better protect consumers from scams. The government has proposed new legislation that would extend the maximum time banks can delay payments by 72 hours, giving them more opportunity to investigate and prevent fraudsters from accessing victims’ money.
The new rules aim to tackle the growing threat of fraud, which accounted for an estimated £460 million in losses last year alone. The powers are intended to give banks more time to intervene in suspected cases, particularly where vulnerable individuals have been targeted by increasingly sophisticated scams.
Under current regulations, banks must either process or reject a payment by the end of the next business day. The proposed changes would allow banks to take up to 72 additional hours in cases where they have reasonable grounds to suspect a transaction may be fraudulent.
Economic Secretary to the Treasury, Tulip Siddiq, highlighted the need for stronger measures to protect consumers, saying: “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 people better, which is why we are giving banks more time to investigate suspicious payments and break the criminal spell that scammers weave.”
Minister for Fraud, Lord Sir David Hanson, also welcomed the measures, stressing the impact of fraud on people’s lives. “Fraud is a crime that can devastate lives, and 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.”
The changes come as fraud continues to be a major problem in the UK, accounting for over a third of all crime in England and Wales. Among the most prevalent types of fraud are purchase scams, where consumers are tricked into paying for goods or services that do not exist, and so-called “romance scams”, which see fraudsters posing as romantic partners to extract money from victims.
The new rules would allow banks to step in more effectively in such cases, giving them more time to investigate suspicious payments and potentially prevent significant financial losses. Banks will also be required to inform customers if a payment is delayed and explain what actions need to be taken to resolve the issue.
Rocio Concha, Director of Policy and Advocacy at Which? welcomed the proposed changes. “This is a positive step in the fight against fraud,” she said. “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.”
UK Finance, the industry body for banking and financial services, has long called for banks to be given more leeway in dealing with suspicious transactions. Ben Donaldson, Managing Director of Economic Crime at UK Finance, said: “This could allow payment service providers 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.”
Banks will be required to compensate customers for any fees or interest charges incurred as a result of payment delays. These new powers aim to ensure a balance between protecting consumers from fraud and maintaining the smooth operation of everyday transactions.
