As part of an ongoing effort to protect consumers, the UK government is granting banks new powers to delay and investigate payments suspected of being fraudulent.
These new rules, set to roll out soon, allow banks to delay payments for up to 72 hours, giving them crucial time to investigate suspicious transactions and help prevent the devastating impact of fraud on consumers.
Empowering Banks to Fight Fraud
Fraud has become one of the most pervasive forms of crime in the UK, with over £460 million lost to scammers in the last year alone. To address this, the government is introducing laws that give banks more time to investigate high-risk payments.
This added 72-hour window could be the difference between stopping a scam and a consumer losing their life savings.
According to Economic Secretary to the Treasury, Tulip Siddiq,
“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.”
These new powers are designed to do exactly that by giving banks a chance to step in when they spot unusual transactions.
Why This Matters for Consumers
Under the new regulations, banks will be allowed to delay payments that they believe may be linked to fraud. Currently, banks are required to process or reject payments by the end of the next business day.
However, with these changes, banks can pause transfers for up to three days if they suspect foul play. This extended time frame gives banks the opportunity to intervene and protect consumers before funds disappear into the hands of criminals.
These laws come at a crucial time, as scammers continue to find more sophisticated ways to exploit vulnerable people.
From “romance scams,” where fraudsters pretend to form romantic connections with their victims, to purchase scams, where buyers are tricked into paying for items that never arrive, these crimes are rising sharply.
Allowing banks to delay suspicious payments could be a vital tool in curbing these types of fraud.
Additional Protections and Responsibilities for Banks
With the new powers, banks are also given added responsibilities. They must notify customers when a payment has been delayed and explain what steps the customer needs to take to unblock the transaction.
Additionally, banks are required to compensate customers for any late fees or interest incurred due to the delay, ensuring that innocent customers aren’t penalised by the security measures.
UK Finance’s Managing Director of Economic Crime, Ben Donaldson, supported the changes, saying,
“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 criminals.”
It’s a delicate balance between ensuring legitimate payments are processed quickly and protecting consumers from fraudulent schemes.
Fraud in Numbers
The following snapshot provides insight into the scale of fraud in the UK:
Type of Fraud |
Losses in 2023 |
|---|---|
| Purchase scams | £210 million |
| Romance scams | £131 million |
| All scams combined | £460 million |
Fraud now accounts for more than a third of all crimes committed in England and Wales, making it the most prevalent type of crime.
The introduction of these new laws is part of a broader government strategy to clamp down on fraud and protect consumers from falling victim to increasingly sophisticated scams.
A Step Towards Greater Security
The introduction of these new fraud prevention laws marks a significant step forward in the fight against scams. By granting banks more time to act, the government is ensuring that consumers are better protected from the financial and psychological harms caused by fraudsters.
While most everyday payments won’t be affected, those at risk of fraud could greatly benefit from the additional safeguards.
As Lord Sir David Hanson, Minister of State with Responsibility for Fraud, commented,
“Fraud is a crime that can devastate lives, and anyone can be affected.”
These new laws demonstrate the government’s determined effort to stop criminals in their tracks by empowering banks to take decisive action when fraud is suspected.
Closing the Loop
Sources: THX News, HM Treasury & Tulip Siddiq MP.
