UK banks given extra three days to delay payments in effort to beat scams

Bank payments can be delayed by an extra three days if lenders suspect consumers are being scammed, as part of a crackdown on booming levels of digital fraud in Britain.

Under changes designed to protect consumers against online scams, high street banks are to be handed new powers by the Treasury to delay and investigate payments suspected of being fraudulent.

The Treasury said it would extend the time that payments can be delayed where there are reasonable grounds to suspect fraud, from the current window of completing or refusing a payment before the end of the next business day to up to four working days.

The government hopes the move will help tackle the estimated £460m lost to fraud last year alone.

It comes after a sharp rise in fraud in the UK payments industry in recent years, including a boom in scammers tricking people into sending money to bank accounts operated by criminals – known as authorised push payment (APP) scams.

Tulip Siddiq, the City minister, told the Guardian: “It ruins the lives of ordinary people who haven’t done anything wrong. Our thinking in the Treasury is we need to protect these people.

“The best way of protecting them is to prevent the fraud before it takes place. So giving banks more time to investigate suspicious payments, before a payment takes place, is probably the best cure.”

Fraud is the most prevalent crime in England and Wales, accounting for more than a third of all crime. This includes so-called “romance scams”, where fraudsters target vulnerable people by pretending to be interested in a romantic relationship before encouraging them to send money to a bank account they control.

Ministers have faced demands to take tougher steps to get social media companies – often used by scammers as a gateway for reaching consumers – to crack down on fraudsters exploiting their platforms.

Siddiq said the online safety bill, passed by the previous Conservative government, would help, while she was working across government, with law enforcement and industry, to tackle the issue.

“It’s not like we’ll end the fraud epidemic with this one piece of legislation,” she said, referring to the powers to delay potentially fraudulent payments. “But we’re trying to do things across government to address these things.

“[We will do] lots more probably. The fact is there’s a huge problem with fraud and this is one aspect of dealing with it. I’m working across government, with all ministers, on how we improve our approach.”

Earlier this month, consumer groups attacked the decision by the Payment Systems Regulator to slash the planned maximum amount that banks will have to refund to UK fraud victims from £415,000 to £85,000. Banks will need to refund victims within five days.

Separately on Thursday, Meta, the owner of Facebook, Instagram and WhatsApp, announced the expansion of a scheme to share information with banks to help guard against fraud.

Meta has been working with NatWest and Metro Bank on the programme, called the Fraud Intelligence Reciprocal Exchange, but said it would now expand the scheme and enrol more banks.