New Powers for UK Banks to Freeze Large Payments
The UK government is granting banks new powers to freeze large payments for up to four days as part of updated fraud prevention measures. These changes will take effect this autumn, ahead of a new fraud regime that requires banks to reimburse victims of "Authorised Push Payment" (APP) fraud.
Currently, banks can only hold authorized payments for 24 hours while investigating potential fraud. The new legislation extends this period to 72 hours, but only if there are reasonable grounds to suspect fraudulent activity.
The government sees this as an additional tool to combat fraud, but some legal experts warn that it could cause disruptions, particularly for home movers. They believe existing measures are sufficient to identify suspicious activity.
New Rules for Reimbursing APP Fraud Victims
The new legislation also includes controversial rules requiring banks to reimburse all victims of APP fraud from October. This includes scams like romance fraud, fake purchase schemes, and investment scams.
Under the new guidelines, victims will be eligible for refunds unless they ignored warnings from their bank, delayed reporting the fraud, refused to share details with their bank or the police, or acted with gross negligence. Vulnerable customers will have additional protections, making it even harder for banks to deny refunds.
The maximum liability for banks under the new regime will be capped at £415,000 per case. The scheme will be funded by a levy on transactions made through the Faster Payments system.
Previously, banks could voluntarily reimburse victims of APP fraud under the Contingent Reimbursement Model (CRM) agreement. Reimbursement rates rose from 19% in 2018 to 62% in 2022 under the voluntary scheme.
The Treasury declined to comment on the new measures.