New plans to reimburse scam victims will be “half-baked” unless regulators take stronger action to protect consumers, MPs have warned.
Rules being considered by the Payment Systems Regulator (PSR) will require banks and building societies to fully reimburse victims of authorised push payment (APP) scams where the loss is over £100.
Push payment fraud, in which somebody is tricked into sending a payment, usually by impersonation, is rampant. As many as 196,000 consumers lost £583m to such scams in 2021, according to UK Finance.
In 2019, a voluntary code for reimbursement of victims was developed which ten banks and other payment services providers (PSPs) are currently signed up to. Despite the code, many victims struggle to get their money back from the banks.
The parliamentary Treasury select committee have previously called for the code to be mandatory in the face of growing harm from APP fraud. The Financial Services and Markets Bill currently making its way through Parliament will require the PSR to establish a system for mandatory reimbursement of APP fraud over the Faster Payments system.
However, Treasury select committee MPs remain concerned that the new plans financial regulators are preparing to help consumers and victims fail to adequately address the problem.
They are questioning why frauds under £100 would not be fully refunded, despite almost one in four APP scams involving amounts less than £100.
Some banks claimed that levels should be set between £200 and £1,000, warning that mandatory reimbursement could lead to moral hazard. However, they provided “very limited evidence” to back this up, the PSR report said.
The TSB bank, which launched a fraud guarantee repayment scheme in 2019, said it had not seen any evidence of “moral hazard” or increased consumer negligence as a result.
The regulator says that the £100 threshold matches the minimum reimbursement level for credit card fraud – a figure last updated in 1983.
The PSR said consumers who show “gross negligence” usually do not need to be reimbursed. The Financial Ombudsman Service would work to define gross negligence.
MPs expressed fears of further delays in scam victims getting their money back.
Harriett Baldwin, chair of the Treasury Committee, said: “Fraud is on the rise and our constituents are being robbed. Regulators need to get their skates on and sort out all of these exclusions and criteria quickly. We will keep up the pressure so that implementation is not dragged out.”
The ombudsman said it will introduce a new banking team to speed up the time it takes to deal with complaints. It said average waiting times for a resolution dropped from 6.4 months in 2021-22 to 3.7 months at the end of last year.