New protection to reduce the risks of payment fraud or paying the wrong person

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A big shake-up in the payments system is on the way. This will introduce new protection to reduce the risks of payment fraud or paying the wrong person. What’s changing?

New protection to reduce the risks of payment fraud

At the moment, if you pay the wrong person by mistake or you’re a victim of payment fraud –  because you make a payment to an account you think is legitimate, it can be difficult to get the money back. If you make a mistake and simply pay the wrong person, it can be hard to get the money back if the person wants to keep it. And if you are a victim of payment fraud, you’ll only get the money back if the fraudster hasn’t already emptied the account (and closed it).

As part of planned changes to the payment system by the Payment Systems Regulator (PSR), extra protection called ‘confirmation of payee’ will be introduced. It’s designed to stop people from paying the wrong account or being tricked into paying a fraudster. There are other changes that will be introduced as well, to improve the way these scams are reported:

  • You’ll be able to report these scams to specially trained bank staff 24 hours a day, seven days a week.
  • You – as the victim – will only have to deal with your own bank or account provider. Your bank will then contact the bank that received the money so you don’t have to.
  • All banks will ask for the same information so there won’t be different systems depending on who you bank with.
  • Your bank will give this information to the bank where the money was transferred to. It can then use this information to investigate.
  • The bank where the money was transferred to will return money (if it can) once it’s investigated. Figures from the first half of 2017 show that only 25% of the money stolen was returned to victims.
  • All banks will also collaborate more widely with each other to support investigations and protect victims.

These changes are due to be introduced in 2018.

Who can you complain to?

At the moment, you can only complain to your own bank if you’ve been the victim of fraud. However, the money that’s taken from your account very quickly ends up in the fraudster’s account. And if this is with a different bank to your own, there may be nothing you can do. You’re not a customer of that bank and they are unlikely to let you complain. On Tuesday (June 27th) the Financial Conduct Authority announced plans to let people complain to the bank that receives the funds stolen from you. This isn’t likely to come into force until 2019 as it’s something the FCA is currently consulting on.

If you’d like to get involved in the consultation, you can find out more on the FCA’s website.

Safeguards when you make regular payments

The plans would also see the introduction of something called ‘request to pay’. This would mean you’d have to confirm that you wanted to pay someone like an energy company or a gym, before the company was able to take any money out of your account.

These changes are also due to be introduced by 2018, but it could be as late as 2020 before they take effect.

How much of a problem is payment fraud?

Until recently there weren’t any accurate figures showing the extent of the fraud. However, new statistics from UK Finance show there were 19,000 victims of payment fraud. Almost 90% were individuals, who lost an average of £3,000 each. The rest were businesses, which lost an average of £21,000.

What can you do now?

There are steps you can take now if there’s a mistake with a payment or you pay the wrong person. However, they won’t necessarily mean you’ll get your money back.

  • If you pay the wrong person by mistake. You’re unlikely to be able to reverse the payment as the money will leave your account pretty quickly. However, you should contact your bank as soon as you spot the mistake. If you act quickly, they may be able to get some of the money refunded to you.

SAVVY TIP: There’s more information in my article called If you make a bank payment to the wrong person how easy is it to get it back?

  • If a company takes money from your account when you don’t want them to. Your rights depend on the payment method used. If you are paying them by Direct Debit, there’s a Direct Debit guarantee, which means the bank must refund you if the wrong amount is taken.

SAVVY TIP: You can read more about the Direct Debit guarantee in my article called Understanding Direct Debits, standing orders and continuous payment authorities. You can also read more about your rights when you make a regular payment by credit or debit card: Your rights when you pay by card with recurring payments or a continuous payment authority.

Related articles:

Four banking frauds and scams to avoid – how to reduce the risks of being a fraud victim

Mobile banking; tips on how to bank safely

Getting a refund from your credit or debit card through ‘chargeback’

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