Blameless fraud victims are set to see the amount they can be reimbursed after losing money in a scam slashed by 80 per cent as the payment regulator bows to lobbying by banks to cap payouts.
The Payment Systems Regulator (PSR) is to reduce the amount victims can claim back after an authorised push payment scam — where victims are tricked into transferring money to criminals — from £415,000 to £85,000. It is expected to be proposed in a new consultation on the reimbursement rules released on Wednesday morning, industry sources said.
These scams cost victims £459.7 million last year, according to the trade association UK Finance.
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Banks have argued that the planned £415,000 limit was too high and could encourage fraudsters to game the system to con banks out of refunds, according to the Financial Times, which first reported the news. Banks have also argued it could put some smaller firms out of business because of the cost of reimbursing victims.
Both Tulip Siddiq, the new Labour Treasury minister, and her Conservative predecessor, Bim Afolami, have had doubts about the rules.
The new rules, which were due to come in from October 7 and apply to all UK payment firms, say that victims should be reimbursed their losses unless they have been grossly negligent. Reimbursement is split 50/50 between the sending and receiving banks. Banks can also choose if a customer has to cover the first £100 of any loss.
The PSR previously said in December that it might consult on changing the maximum reimbursement limit ahead of October 7 if there was “convincing evidence to do so”. The Payments Association, a trade body representing predominantly smaller fintech firms, had called on the PSR to reduce the limit even further to £30,000.
The reduction to £85,000 would bring the limit into line with the financial services compensation scheme, which covers savers’ deposits if a bank or building society fails, rather than what the Financial Ombudsman Service (FOS) can award in compensation if a consumer complains about a financial firm.
The news comes as the FOS, a free appeals body to which consumers can complain, said it received 8,734 complaints about fraud and scams between April and June — the most ever in a three-month period and up from 6,094 in the same period a year ago. It said 4,752 of these were authorised push payment (APP) scams, where the victim is tricked into making large bank transfers to an account posing as a legitimate payee.
Rocio Concha from the consumer group Which? said: “It’s outrageous that the payments regulator is set to water down vital scam protections weeks before they were due to take effect and that this move follows months of lobbying from firms that refuse to take fraud seriously.
“Slashing the reimbursement limit risks exposing victims of the highest value scams to devastating financial and emotional harm and also significantly reduces crucial financial incentives for payments firms to put in place effective fraud security measures.”
The PSR said that it planned to publish a consultation at about 11.30am on Wednesday following an evidence-based assessment of high-value authorised push payment scams.