It will give providers a further 72 hours to investigate payments, but only where there are reasonable grounds to suspect fraud or dishonesty and more time is needed to contact the customer or other parties such as law enforcement, the Government said.
The legislation will generally apply to authorised push payments (APPs).
The UK has seen an increase in authorised push payment fraud over the past few years, and in 2022 victims lost £485 million to such scams, the Government said.
APP scams happen when fraudsters trick victims into initiating and authorising a transaction, often by posing as legitimate organisations such as banks, businesses or the police.
Payment service providers have generally been required to process payments by the end of the following business day, giving only a limited timeline to investigate.
The Government intends to lay the legislation before Parliament so that it comes into force by October 7 – when new consumer protections against APP fraud will come into force.
Economic Secretary to the Treasury Bim Afolami, said: “Fraudsters spin whole webs of lies and fabricate all sorts of things to convince people to send them money – this legislation will give banks, other payment service providers and law enforcement more time to get in touch with victims and break the fraudster’s spell before money is sent.
“The Government is absolutely committed to tackling fraud and recognises the impact of this devastating crime on victims – this legislation is another tool in our arsenal to fight fraud.”
In December 2023, the Payment Systems Regulator (PSR) outlined new consumer protections against APP fraud, which will come into force from October 7 this year.
At present, many banks have signed up to a voluntary reimbursement code, but there have been concerns that this has been applied inconsistently – meaning the chances of getting a refund may, to an extent, depend on who someone banks with.
The regulator said its new reimbursement requirement will prompt a step-change in fraud prevention and see the vast majority of money lost to APP frauds reimbursed to victims.
Its policy statement confirmed that the maximum level of reimbursement per claim will be set at £415,000. A claim excess of no more than £100 may be applied.
The £415,000 limit is in line with the maximum award the Financial Ombudsman Service (FOS) can make when considering complaints.
Alongside the new requirement to reimburse victims, the PSR previously outlined plans to increase the incentives on all payment firms to do more to detect and prevent APP fraud from happening in the first place, including splitting the cost of reimbursement 50/50 between “sending” and “receiving” firms.
