New Regulations Providing Enhanced Refund Protections for Victims of Payment Fraud Implemented
Consumers who fall victim to fraudsters and inadvertently transfer money to them will now have the opportunity to seek reimbursement of up to £85,000.
New measures have been introduced that mandate banks to refund individuals affected by authorised push payment (APP) scams.
APP fraud occurs when individuals are deceived into making substantial bank transfers to an account posing as a legitimate recipient.
This protection is applicable to transactions made through Faster Payments or CHAPS, used in high-value transactions like property purchases, between UK bank accounts.
David Geale, the managing director of PSR, highlighted that payment firms will now have stronger motives to prevent APP fraud.
“Today marks a significant step in expediting the process for APP scam victims to recover funds lost to criminals, with a guaranteed minimum level of protection now in place.”
APP fraud resulted in a total loss of £459.7 million last year, with £287.3 million returned to victims. The Financial Ombudsman Service (FOS) reported an increase in fraud complaints this year, including a rise in APP scams.
Reimbursement
Under the new rules, consumers, including individuals, small businesses, and charities, will receive standard coverage up to £85,000.
Banks and payment firms have the option to reimburse amounts exceeding this limit, with FOS reviewing cases of dissatisfied claimants. FOS’s compensation threshold is £430,000, and each case is evaluated on its unique merits.
Some firms may choose to apply an additional excess of up to £100, although this cannot be imposed on vulnerable customers. The regulator cautioned individuals to remain vigilant when making payments to prevent claim rejection.
Denied reimbursement claims may result from consumer complicity in fraud or gross negligence. Failure to heed warnings or respond to information requests during payments may lead to claim rejection.
Typical APP Scams
Various typical APP scams include invoice and mandate scams, where criminals persuade victims to redirect payments to their account.
In impersonation scams, offenders masquerade as police or bank representatives and may seek remote access to victims’ computers.
Fraudsters also employ fake social media or dating profiles in ‘romance scams,’ manipulating victims for financial gain under false pretenses.
In lottery or inheritance scams, criminals lure victims with promises of large sums but demand a fee upfront. Once paid, the promised funds never materialize.
PSR reiterated its commitment to collaborating with businesses following the implementation of new regulations.
“We will continue monitoring the impacts of these requirements post-enforcement, including conducting an evaluation of their effectiveness after a year,” stated the regulator.
