UK Banks Now Have Up to Four Days to Check Payments for Scams

(Bloomberg) -- The UK government will give banks more time to investigate payments they suspect are fraudulent in a welcome reprieve for lenders as they prepare for new rules that will require them to reimburse many customers that fall victim to scams. 

For now, lenders must process payments by the end of the following business day. Under the new proposed laws, they’ll be given an extra 72 hours to investigate if there are “reasonable grounds” to suspect a payment is dodgy, according to a statement.

“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,” Ben Donaldson, managing director of economic crime for the industry group UK Finance, said in the statement.

It’s the latest sign that policymakers are looking to limit the impact from the global surge in so-called authorized push payment fraud, in which criminals trick people into sending money to an account outside their control.

In the UK alone, millions of consumers have been dogged by scammers using these tactics, with losses mounting to £460 million last year, according to UK Finance. This summer has been particularly bad, with lenders issuing repeated warnings to customers that fraudsters have found more excuses to prey on them.

The UK’s Payment Systems Regulator has come up with a plan it hopes will better protect consumers. Under new rules that will go into effect on Oct. 7, the UK will require all British banks, fintechs, and payment firms to reimburse fraud victims within five days. The refund will be split equally between institutions sending and receiving the fraudulent payment and can reach as high as £85,000.

A growing number of banks have sought to shine a light on the role that other industries play in the recent surge in fraud. For instance, Revolut Ltd., which has 10 million customers in the UK, has said most of the scams that customers reported last year started on Meta Platforms Inc. social media. 

On Wednesday, Meta announced it had formed a partnership with banks including NatWest Group Plc and Metro Bank Holdings Plc to share data and stop scammers from taking advantage of customers. The pilot program allowed Meta to remove about 20,000 accounts run by fraudsters, the company said in a statement. 

Under the government’s new rules, which are expected to be implemented this month, bill payments and bank transfers could potentially take longer. Banks will have to provide evidence for why they want to delay a payment and they’ll also be on the hook for any interest or late payment fees customers incur as a result of the held up payments. 

“We are giving banks more time to investigate suspicious payments and break the criminal spell that scammers weave,” Tulip Siddiq, economic secretary to the Treasury, said in the statement. 

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