HM Treasury publishes final draft of payment delay legislation 

On 3 October 2024 the HM Treasury published its final draft of the Payment Services (Amendment) Regulations 2024 ("PSRs 2024"), proposing amendments to the Payment Services Regulations 2017 ("PSRs 2017"). Once approved, it will allow payment service providers ("PSPs") to slow down the processing of outbound payments when there are reasonable grounds to suspect fraud or dishonesty. 

The PSRs 2024 aim to support PSPs with efforts to tackle authorised push payment ("APP") fraud by allowing PSPs a longer period to investigate potentially fraudulent transactions.

The final draft of the PSRs 2024 confirms that PSPs will be afforded up to four business days to investigate potentially fraudulent transactions from the point at which they receive a payment order, a significant increase to the timeframe which PSPs are currently required to adhere to (ie. the end of the next business day). Where a PSP exercises the ability to delay, they also make provision for how a PSPs customer should be notified of a delay, as well as in relation to the PSPs liability for any charges or interest incurred by the customer as a result of a delayed payment.

The key question for PSPs, given the volume and expectation of speed of transactions, will be how to operationalise such an allowance? And where does that leave arguments on an alleged duty to stop fraudulent transactions, when they have not been stopped?

FCA Consultation

The Financial Conduct Authority ("FCA") has been consulting on guidance to clarify how PSPs should apply the new legislation, including when they should consider delaying an outbound payment. For further details please see our previous article here. The FCA's guidance consultation ends today, and it is expected that a revised version of its ‘Payment Services and Electronic Money – Our Approach’ document containing updated guidance will be published by the end of 2024.

Next Steps

HM Treasury previously set out in its policy note an intention for the PSRs 2024 to commence at the same time as the introduction of the Payment Systems Regulator's new reimbursement rules for APP fraud (in force from 7 October 2024) (the "Reimbursement Rules"). Now confirmed for CHAPS payments as well as payments made within the Faster Payments System, the Reimbursement Rules introduce consistent minimum standards to reimburse victims of APP fraud. For further details please see our previous articles here and here.

However, given the early election, it is only now that the final draft of the PSRs 2024 is being published (and it will be laid before Parliament shortly after its return from conference recess).

If you would like to discuss the impact of the PSRs 2024, the FCA's proposed guidance or the new reimbursement rules in more detail, please do get in touch with a member of the team below.