Banks are quietly trying to relax vital new rules designed to protect fraud victims who have their life savings stolen, Money Mail can reveal.
From October, banks will be forced to refund scam victims for losses of up to £415,000 under new rules from the payments regulator.
Until now, banks have only had to opt for a voluntary scheme to reimburse customers affected by scams.
However, Money Mail can reveal that bank bosses held an emergency meeting with the City minister yesterday in a last-ditch bid to slash the limit.
Several big banks want the limit to be set at £85,000, sources said. It is understood that some smaller banks want the limit to be reduced to just £30,000.
Scourge: Latest figures show fraud losses rose to £1.17 billion last year and the number of cases reported in 2023 increased by 12%.
This would mean thousands of elderly or vulnerable customers who are tricked into parting with their life savings will be left with huge losses.
Almost a quarter of all money stolen by fraudsters was linked to cases where victims lost more than £85,000, according to figures provided to the Payment Systems Regulator by banking trade body UK Finance last year.
Money Mail calculations show victims would have lost £115.9m in refunds if the limit had been set at £85,000.
Meanwhile, new figures show fraud losses rose to £1.17 billion last year. The figures, published today by UK Finance, show that the number of cases reported in 2023 increased by 12 per cent.
Rocío Concha, policy and advocacy director at consumer group Which?, says: “It is shocking that, as this latest fraud data emerges, the Government appears to be excluding scam victims and siding with banks and financial firms who want to cut reimbursement levels for authorized payment fraud and maintain an unfair system in which they act as judges and judge over victims at an incredibly distressing time in their lives.
“If the Government is serious about its fraud strategy, it must support the regulator’s rules, which give the industry a strong incentive to implement more effective security measures.”
The new scam rules cover all cases of “push payment” fraud, which is where victims are persuaded or tricked into authorizing a payment to a scammer.
This includes online shopping scams, phishing scams, romance scams, or investment scams.
The first indication that banks were unhappy with the proposed £415,000 cap on repayments came last week in a letter from 30 companies (all members of The Payments Association, an industry group) to the Treasury’s Economic Secretary, Bim Afolami.
They claimed the £415,000 upper refund limit was “simply not proportionate” and could be detrimental to smaller payments businesses.
Instead, they argued that banks should not be forced to refund losses over £30,000, which they suggested was closer to the average loss.
Threat: Thousands of elderly or vulnerable customers who are tricked into parting with their life savings could be left deeply out of pocket
Consumer groups and charities supporting victims say they were unable to take part in talks with the city minister, Mr Afolami.
They expressed concern that ministers appeared to be taking proposals to reduce the cap seriously. Money Mail understands the payments regulator was also excluded from the meeting.
Afolami is believed to believe there are “major issues” with the incoming rules.
Which? told Money Mail that it believes the companies leading the charge to reduce the limit to £30,000 are smaller payments companies, a sector that has previously received warnings from the Financial Conduct Authority for not doing enough to prevent fraud on its platforms.
Wayne Stevens, national fraud lead at the charity Victim Support, warned that reducing the maximum refund to £30,000 would leave victims “absolutely devastated”.
He added: ‘This would be a terrible outcome for fraud victims and would undermine the whole purpose of the repayment scheme.
The new rules are supposed to ensure that victims receive reimbursement and that banks have a financial incentive to prevent fraud.
«Dramatically lowering the threshold significantly reduces its effectiveness. Reducing the maximum level would also exclude a large number of victims as, unfortunately, it is quite common for people to lose more than £30,000.’
The charity has long advocated for no maximum limit on repayment. The Payment Systems Regulator (PSR) has indicated that it may review the maximum level of claims before October if there is compelling evidence to do so. However, he has not yet seen any, Money Mail understands.
Lifetime savings: Almost a quarter of all money stolen by fraudsters was linked to cases where victims lost more than £85,000, according to figures from last year.
The banks have already forced the regulator to make a 180-degree turn on the limit. In September 2022, it did not propose any cap, but came under pressure to back down following backlash from payments companies.
The £415,000 limit was proposed in August 2023. PSR said around 99.98 per cent of victims would be within the limit and therefore protected. Those who lost more than the limit would still receive a refund up to this level and would have to accept losses above that limit.
“We believe that a cap of £415,000 strikes a balance between protecting and reimbursing almost all consumers and protecting PSPs (payment service providers) from very large frauds that could affect their financial viability,” he said.
“This should continue to incentivize PSPs to improve and maintain anti-fraud measures for all securities.”
Fraud rates at smaller banks and payments companies tend to be much higher than at traditional banks, the regulator warned last year.
Ten of these smaller companies were among the 20 largest recipients of fraudulent money in the UK. This means that criminals use these platforms to open accounts and receive the proceeds of crime or as a way to move cash.
Consumer groups and charities supporting victims say they were unable to take part in talks with City Minister Ben Afolami (pictured).
A PSR report published in November revealed dramatic variation in different banks’ willingness to reimburse victims. The best companies covered up to 91 percent of the money lost, while the worst covered only 10 percent.
The number of reported scam cases involving authorized push payments (PPP fraud), where payments are sent under false pretenses, rose 12 per cent in 2023 to 232,429, according to UK Finance figures published today.
In total, £459.7 million was lost last year, 5 per cent less than the previous year.
Criminals are increasingly enticing online shoppers to participate in so-called shopping scams, in which a person pays in advance for goods or services that never arrive, and the number of successful attacks increased by 34 percent to 156,000 , the highest total ever recorded.
The amount of money lost in this type of scam increased by 28 per cent to £85.9 million last year.
The number of reported cases of romance scams has also soared, increasing by 14 per cent last year compared to 2022. Victims lost a combined total of £36.5 million, a year-on-year increase of 17 per cent.
Stevens says victims of romance scams tend to lose large sums, spread over a series of smaller payments. Therefore, many could be left with a considerable amount of out-of-pocket expenses if the limit is £30,000.
Responding to the industry meeting with the Government, a PSR spokesperson said: “We remain confident this is the right approach, going further than ever to protect consumers and shifting the focus of all businesses towards strengthening of their anti-fraud systems. .’
An HM Treasury spokesperson said: ‘It is important that victims of fraud get a refund. While the PSR is responsible for the new rules, the Government is aware of the strong concerns raised by the industry and we encourage the PSR to address them.’
j.beard@dailymail.co.uk
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