Banks given 3 extra days to delay payments in fraud crackdown

High street banks will be given powers to delay and investigate suspicious payments for up to four working days, under new efforts from the Treasury to fight growing levels of digital fraud.

Scams cost Brits an estimated £460 million last year. It’s hoped the move will help banks better protect consumers from increasingly sophisticated online scams.

APP scams on the rise

One of the most common types of fraud recently are authorised push payment (APP) scams. In these schemes, fraudsters trick people into voluntarily sending money to bank accounts controlled by criminals.

Common tactics include:

• romance scams – scammers pretend to be interested in a romantic relationship to gain trust before asking for money
• investment scams – fraudsters pose as investment advisors pitching get-rich-quick schemes
• purchase scams – scammers set up fake online stores or classified ads to ‘sell’ goods that are never delivered after payment

The extra time will allow banks to investigate suspicious transactions more thoroughly before releasing money to potentially fraudulent recipients.

The Treasury hopes this will help prevent more people from falling victim to scams in the first place, rather than trying to recover stolen money after the fact.

Criticism of refund cap

While consumer groups have welcomed the new powers for banks, some have criticised the Payment Systems Regulator's recent decision to drastically reduce the maximum amount fraud victims can be refunded by banks. It’s fallen from £415,000 to just £85,000.

Although banks will be required to issue refunds within five days, many feel the lowered cap leaves some victims without a suitable solution.

Calls for stronger action against social media scams

Fraudsters often use social media platforms to reach potential victims, leading to calls for companies like Meta (owner of Facebook, Instagram and WhatsApp) to take stronger action against scammers.

The government's online safety bill is expected to help hold social media firms more accountable for illegal content, but ministers say that a comprehensive approach across government, law enforcement and industry is needed.

Meta recently announced it is expanding a scheme called the Fraud Intelligence Reciprocal Exchange, which shares information with banks like NatWest and Metro Bank to help guard against fraud.

More banks are expected to join the programme.