Clearly one of the big stories over the last couple of weeks – presuming you are not a civil servant paid more than the Prime Minister stepping down to avoid being the centre of attention – has been the new powers that are going to be afforded to banks to allow them to pause payments for up to four days.
These measures are due to come into play at the end of October, and needless to say, it has generated some concern and consternation amongst those active in the house purchase/sale process about how it might impact on clients and whether completions could be missed as a result.
Firstly, why has this power been given? Previously banks had until the end of the next business day to either process or decline a payment transfer, and the extension of another three days is designed to give banks more time to effectively review potentially fraudulent activity.
As a sector which continues to experience more than its fair share of fraudulent attempts, then I think we can all appreciate the need to ensure all parties have adequate time in order to head off any bad actors at the pass, so to speak.
However, we at the same time, also need to know that our attempts to transfer funds, to complete transactions, to ensure clients are in their homes on time or have the remortgage finance they need, or the money they are expecting, is also not going to be stymied by these new timescales.
So, how might we address this? Well, the first point to know is that the Treasury Regulations enable businesses to opt out. The legislation reads:
‘Small, medium and large businesses, which may have numerous obligations to make timely payments to suppliers, will be able to opt out of these provisions with the mutual agreement of their payment service provider.’
That being the case, any concerned conveyancing firm should get in touch with their payment service provider to opt out if they are worried they will be impacted by the new regulations.
However, perhaps a deeper question is whether any bank would consider payment to a regulated lawyer as suspicious? I would think not, so payment into solicitors/conveyancers is unlikely to be subject to this sort of delay.
That being said, the further time is being provided so the banks can contact a customer or a third-party, such as law enforcement, to establish whether they can execute a payment or not. And this will of course potentially have an impact on conveyancing firms in terms of them sending payments to others.
We have to ask the question, would a bank seeing a payment, for example, to an incorrectly-named account from a conveyancer, take that extra time? We must think they would – unless the firm have opted out – so this will need to be considered.
Also, who is going to be impacted by this within our sector? If a payment is held before it gets paid into a recipient’s account, on the basis that money to a client is unlikely to hold up a transaction, then it will not impact conveyancers. However, it might clearly impact a seller who is expecting their money immediately but find the Bank have decided to exercise the time to check it further.
The other point to make is that the banks can’t arbitrarily hold up payments just for the sake of it. They need to have ‘…reasonable grounds to suspect fraud or dishonesty’. Again, would they have reasonable grounds to suspect conveyancers of this? Or payments to conveyancers?
There must be an ‘evidential basis’ to their action to hold up payments, and if they do exercise this, they also have to pay any interest lost or charges, caused by any delay.
Overall, it is perhaps another reason for firms to remind clients to ensure their funds are with them as early as possible. In itself, it’s an opportunity to encourage a five-day period between exchange and completion to avoid the possibility of any delays caused by a potential hold on the payment.
Also, as a final aside, with this extra ‘protection’ in place, there may also be some tangible benefits to be had in terms of firm’s professional indemnity insurance policies, and we should not be backward in exploring these with insurers.
Beth Rudolf is Director of Delivery at the Conveyancing Association (CA)
