Millions of bank fraud victims to have payouts slashed under big change to new rules expected in weeks

FRAUD victims who have been tricked into sending money from their accounts will see compensation slashed under "outrageous" new plans.

Banks had been set to offer up to £415,000 to reimburse customers when they have unwittingly handed money to fraudsters under rules coming in next month.

But now the cap is likely to be lowered to £85,000, the Payment Systems Regulator (PSR) today announced.

The move had followed “months of lobbying from firms,” according to Rocio Concha, director of policy and advocacy at consumer group Which?.

She said: “It’s outrageous that the payments regulator is set to water down vital scam protections weeks before they were due to take effect.”

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, she added.

Fraud is broadly split into two categories authorised and unauthorised.

In the former, victims are duped into handing over cash or giving their consent to fake payments while unauthorised fraud is where criminals typically steal financial information to take out products in victims’ names.

Purchase scams are the biggest driver of authorised fraud with people buying in advance for goods or services that are never received, often through social sites such as Facebook.

Victims were tricked into giving away £459.7m through authorised push payment fraud, according to financial figures from industry body UK Finance. 

Yet, victims of authorised push payment fraud are far less likely to get money back with victims receiving 62% of cash back after being scammed compared to 98% of unauthorised targets.

At present, banks have just signed up to a voluntary reimbursement code which says customers must be reimburse but a report from the Treasury found that money for victims is inconsistent and many do not ever get money back.

New rules coming in October 7 are supposed to tackle the issue by making sure victims are reimbursed.

The initial cap had been set at a top limit of £415,000 but the PSR today said the cap of £85,000 would be in line with the Financial Services Compensation Scheme (FSCS) limit.

The proposed new cap will still see over 99% of claims covered, by volume, the regulator said.

The body add that a review had found that out of over 250,000 cases – there were 18 instances in 2023 of people being scammed for more than £415,000, and 411 instances of more than £85,000.

David Geale, the PSR’s managing director, said: “We listened to concerns about the reimbursement limit and committed to collecting more evidence to inform our approach.

“As a result, we are now consulting on a limit that still covers the vast majority of authorised push payment scams and strikes the right balance.

“Under our proposals, consumers in the UK will still receive world-leading protection, payment providers will still be heavily incentivised to improve anti-fraud protections and we maintain effective market competition and innovation.”

The Financial Ombudsman Service (FOS) said this week that scam-related complaints had reached their highest level since at least early 2018.

In the first quarter of this financial year (April 1 to June 30), consumers lodged 8,734 gripes about fraud and scams, the FOS said.

More than half were in relation to customer-approved online bank transfers, also known as authorised push payment (APP) scams.

HOW CAN I PROTECT MYSELF?

More than three quarters of authorised fraud originates online.

So you should be extra wary when handing over cash for goods or services found online that you haven’t yet received. 

People looking to attend events this year such as the Oasis concert could fall prey to scammers.  

Buy from reputable sources and sites to protect yourself. If prices are too good to be true, take the time to carry out extra checks on the source. 

Fraud cases that originate through phone calls make up fewer cases but losses are often far larger. These are typically when criminals impersonate banks or other trusted sources.  

It’s ok to reject, refuse or ignore requests for cash. Usually it is criminals that will try to pressure or rush you into payments. If you are in doubt over a caller’s identity, call a trusted company or organisation phone number to check. 

If you think you have been scammed, contact your bank immediately and report it to Action Fraud at actionfaud.police.uk or call 0330 123 2040.