The UK banking industry has serious concerns about the new Public Authorities (Fraud, Error & Recovery) Bill. The new bill will give additional powers to the Department for Work and Pensions (DWP) in the UK.

UK banks have been privately pushing back against the proposals from first draft but are now publicly raising their concerns as the bill is likely is to go ahead into law. Comments released through the trade body UK Finance highlight that the "the plans could undermine the banks' own efforts to protect vulnerable account holders."

Currently, the DWP has the power to reclaim overpayments through reduced welfare payments, debt collection and PAYE. They can also obtain limited banking information about account holders where they suspect fraud.

The newly proposed powers give the DWP more detailed access to bank accounts while bypassing the court system. They will be able to obtain full banking statements and where viable, take money directly from the bank accounts of those who their systems indicate have been overpaid.

These powers are designed to be used to make it easier to recover overpayment due to fraud but could also be used in other circumstances and even where the DWP themselves have made an error leading to overpayment.

With these new, more direct - and not court-regulated - powers, the banks are worried about their duty of care to their customers; especially those identified as vulnerable.

The banks also point out that such powers could leave them in contravention of their consumer protection duties as policed by the FCA and the Financial Ombudsman. They would prefer the DWP concentrate on removing errors leading to overpayment.

The DWP has responded by providing figures for overpayments in 2024: £7.4bn due to fraud, versus £2.4bn due to errors by claimants or the DWP. The public body aim to use the new powers to reclaim over £1.5bn per year that is currently lost to fraudulent overpayments.

It looks like the banking system is hoping that the bill will be amended to include provisions both protecting vulnerable customers, but also indemnifying the banks themselves against possible fines and sanctions should DWP actions affect the ability of the banks to uphold their duty of care.