- Payment systems regulator to implement mandatory refund system
Banks must compensate fraud victims up to £85,000 within five days under a new reimbursement scheme, after the original limit of £415,000 was diluted.
Compensation payments for scam victims will become mandatory from October 7 under rules set by the Payment Systems Regulator.
The new rules will reduce the maximum payment from the £415,000 limit that was proposed in an earlier draft of the regulations.
Cashing in: Scammers stole more than £450m from their victims in 2023 alone, and app scams are on the rise
The Payment Systems Regulator said 99 per cent of claims would be covered by the £85,000 limit, with only 18 claims in 2023 for more than £415,000 and 411 cases for more than £85,000.
Currently, banks refund victims of scams on a voluntary basis, although many have chosen to adhere to the Contingent Refund Model (CRM) code, meaning customers will be refunded except in exceptional circumstances.
Under the new system, once banks or payment companies have reimbursed the claimant, they will be able to claim half of the money back from the financial institution the scammer used to receive the funds.
The Payment Systems Regulator said the Bank of England would review the £85,000 limit over the next 12 months.
In a statement, the Payment Systems Regulator said: “This was a carefully balanced decision, which provides significant protection to victims of fraud and strikes an appropriate balance between taking into account the PSR’s objectives of innovation and competition and ensuring that payment systems work well for everyone.”
Complaints about fraud and scams to the Financial Ombudsman Service reached their highest level in a three-month period between April 1 and June 30 this year.
In total, consumers filed 8,734 complaints, compared to 6,094 in the same period last year.
More than half of the cases involved customer-approved bank transfers, known as authorized push payment (APP) scams. In these scams, fraudsters manipulate their victims into dialing payments by believing they are a legitimate business or government agency.
These scams often come in many forms and could be as simple as a text message purporting to be from the victim’s bank.
In 2023, there were 232,429 cases of PPP fraud, with victims losing a total of £459.7m, according to UK Finance.
Rocio Concha, director of policy and advocacy at Which?, said: ‘This decision puts us all at greater risk of being targeted by criminals because it reduces the incentives for banks and payments firms to take fraud prevention seriously.
“The regulator has shamefully marginalised victims of scams, despite evidence showing that this decision could have a negative financial and psychological impact on them. Instead, it has caved in to a pressure campaign by some companies in the payments sector.”