Latest news with #paymentprotection
The Sun
5 days ago
- Business
- The Sun
Major rule change for firms like PayPal and Revolut to protect millions of customers' cash
MILLIONS of people using payment firms will see their cash better protected due to a major rule change. The Financial Conduct Authority (FCA) is set to enforce new practices to ensure shoppers are offered bigger refunds, and with fewer delays, if a payment firm goes bust. 1 The new rules, affecting those using firms like PayPal, Revolut and Wise, come into force from May 7, 2026. The rules will oblige payment firms to prove customer's money is protected through monthly reports. Firms will also have to be audited once a year to ensure they are safeguarding funds, carry out daily checks to keep records of funds and put risk management practices in place so customers' cash is protected should they go out of business. The FCA said it is giving industry nine months until the new rules kick in so it has enough time to prepare. It also said the audit rule will not apply to firms holding less than £10,000 in customer funds. Funds held by payment and e-money firms are not protected by the Financial Services Compensation Scheme (FSCS), which entitles you to compensation of up to £85,000 if a financial services firm fails. Instead, they are responsible for safeguarding customers' funds themselves. But this has historically led to money being lost or delays in refunds being issued when firms have gone out of business. A number of payment firms went bust between 2018 and 2023, leaving customers short of cash. Firms that became insolvent, when a business cannot afford to repay its debts, over this five-year period had average shortfalls of 65% of their customers' funds. I chase refunds for a living - how to get your money back Matthew Long, director of payments and digital assets, FCA, said: "People rely on payment firms to help manage their financial lives. But too often, when those firms fail, their customers are left out of pocket. "Most of those who responded to our consultation agreed we need to raise standards to protect people's money and build trust, but any changes needed to be proportionate, especially for smaller firms. "We'll be watching closely to see if firms seize the opportunity and make effective improvements that their customers rightly deserve – this will help us to determine whether any further tightening of rules is necessary." It comes after the FCA launched a consultation looking at safeguarding practices among payment firms last September. Firms were given until December that year to offer their thoughts on the consultation. Payments firms, also known as payment service providers (PSP), are third-party companies that facilitate electronic payments for businesses through various payment methods. Customer use of them has risen in recent years. The FCA's 2024 Financial Lives Survey revealed that the percentage of people using them had grown from 1% in 2017 to 12% in 2024. It also found roughly one in 10 e-money holders in the UK was using e-money accounts as their main day-to-day transactional account. The Sun asked PayPal, Revolut and Wise to comment. FCA consulting on car finance mis-selling compensation scheme MILLIONS of drivers are set to get £950 car financing compensation after the FCA launched a consultation. The regulator confirmed on Sunday it will consult on a redress scheme for motorists stung by extra charges and interest. This follows the Supreme Court's decision last Friday to overturn a ruling that accused companies of breaking the law by not telling borrowers about "hidden" commission payments. Claims about "commission disclosure complaints" impact up to 99% of car finance agreements. However, the UK's highest court sided with the banks, meaning they avoided the possibility of having to pay compensation to millions of drivers over these complaints. Despite this, drivers who took out personal contract purchase (PCP) or hire purchase agreements may still be eligible for compensation, along with those who were subjected to "excessive" commission charges. This is because the FCA has been investigating and considering a financial redress scheme for car finance agreements made before 2021. These claims focus on "discretionary commission arrangements" (DCAs), which applied to 40% of car finance deals. Under DCAs, brokers and dealers could increase the interest rates charged to borrowers without informing them. By doing this, they earned higher commissions. The financial watchdog has now confirmed plans to consult on an industry-wide compensation scheme. This consultation is set to begin by early October, and if the scheme is approved, the first payments could be made in 2026.
The Independent
11-06-2025
- Business
- The Independent
Shoppers warned that popular ‘fast' payment method could leave them unprotected
Consumers are being encouraged to understand their payment protections amid the growing popularity of 'pay by bank' options. The method allows for direct, secure transfers from a bank account without needing card details or recipient information. However, Which? has highlighted a potential 'protection gap' if purchases go wrong. While pay by bank is increasingly used for credit card payments, bill settlements, and retail purchases, Which? warns it lacks the Section 75 and chargeback protections associated with other payment methods. Section 75 of the Consumer Credit Act can hold credit card companies liable for faulty or unfulfilled purchases, potentially allowing shoppers to claim refunds from their provider if the retailer fails to reimburse them. People using a debit card or a credit card for purchases could also potentially get their money back via the voluntary chargeback scheme. Which? said pay by bank is a 'potential game changer' for businesses as they can sidestep card transaction fees and also benefit from receiving customer funds immediately. There is also appeal for consumers too as refunds can be processed instantly, and card details are not shared when making a transaction – eliminating the risk of them being stolen or compromised. People do have general purchase rights under the Consumer Rights Act, meaning that goods must be fit for purpose, as described and of satisfactory quality. But Which? said these protections are not always easy to enforce and in some cases may end up with people needing to go to a small claims court. People may also face difficulties in the event of a business going bust, particularly if there is an issue with a future-dated purchase such as a flight, a festival, or a household big ticket purchase such as a kitchen or a sofa, the consumer group said. Jenny Ross, Which? Money editor, said: 'Innovations like pay by bank present opportunities for businesses and consumers alike, but they're not without risk, particularly as they lack the rigorous purchase protections you get when paying by card. 'We're calling on the regulator to act to ensure consumers can use pay by bank with confidence, but in the meantime, we'd urge consumers to think carefully before using it to book events or make substantial purchases – for now, your good old-fashioned credit or debit card may be the best option.' A spokesperson for banking and finance industry body UK Finance said: 'There are a range of options for making payments online which provides customers with choice as to how they wish to pay. Different payment methods do come with different levels of protection and it's worth being aware of these when shopping online, particularly when making higher value purchases.'
