Fraud victims have received new protections that will mean up to £85,000 of losses from a scam must be refunded by the account holder’s bank within five days.
The Payment Services Regulator (PSR) has set the maximum reimbursement limit for victims of authorised push payment (APP) fraud at £85,000.
The limit applies from 7 October and brings it in line with payouts from the Financial Services Compensation Scheme for when a regulated firm goes bust.
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It is lower than the £415,000 previously proposed by the PSR.
It comes as UK Finance data shows the number of cases of APP scams rose by 12% to 232,429 in 2023, with losses totalling £459.7 million.
Banks previously could choose whether to refund victims, depending how much attention they paid to warnings.
But the PSR’s new rules mean refunds are now mandatory up to the value of £85,000.
What is an APP scam?
APP fraud is one of the most common types of scam nowadays, as scammers take advantage of our increasingly digital lives.
It typically involves an account holder being tricked into making a payment from their own online account for fake goods or services.
The most common is purchase scams, where people are tricked into paying for goods that never materialise, with £85.9 million lost last year - the highest loss ever recorded, according to UK Finance.
Other types of APP fraud include romance scams, where victims are tricked into believing they are in a relationship and send money to scammers or to criminals impersonating a bank or the police and send funds to a “safe account.”
What are the protections for APP fraud victims?
Previously, a bank could decide if it wants to refund a fraud victim.
Many will have warnings when you make a payment online to alert you to potential scams and they may argue that it is your own fault if you didn’t pay attention.
Most banks were part of a voluntary scheme - the Contingent Reimbursement Model (CRM) - that committed to refunding APP fraud victims but they can refuse if it is believed that warnings were ignored.
However, scammers can be pretty convincing so the PSR is aiming to further protect account holders by making it mandatory to reimburse APP fraud victims within five days.
The PSR said: “The PSR’s requirements will provide world-leading protections to people who fall victim to scams – with over 99% of APP claims covered by the reimbursement cap. It will also give firms strong financial incentives to continue to make improvements to their fraud prevention controls.
“This was a carefully balanced decision – which provides significant protection to fraud victims and strikes an appropriate balance having regard to the PSR’s innovation and competition objectives and making sure that payment systems work well for everyone.”
How to spot a scam
Consumers still need to be wary of scams and can’t just rely on being reimbursed.
Banks will still have warnings before a payment is made and can ‘stop the clock’ and delay repayments if they think a claim is suspicious or if it is believed that the account holder didn’t take enough level of care when making payments.
That means the normal rules will still apply.
Don’t be pressurised into making fast decisions or transferring money quickly, official organisations such as your bank or the police will not rush you.
Try to call back an organisation on a separate number to verify if it is really them and be careful about transferring money to people you don’t know.
Also, it is worth checking reviews for companies when purchasing online to check if they are genuine.
“Unfortunately, fraud is big business and with advancements in technology becoming more and more sophisticated,” says Riz Malik, independent financial adviser at R3 Wealth.
“However, the banks do not have an unlimited budget to keep on reimbursing fraudulent transactions as ultimately, we all pay. Improving fraud awareness and prevention is key but this problem is not going away any time soon.”
Emma Lovell, chief executive of the Lending Standards Board, which oversaw the CRM, said reimbursement following a successful scam helps undo the financial impact of fraud on a customer, but it cannot undo the emotional distress.
"Even though the new regulatory framework does not include prevention requirements, I’d expect the CRM code signatories to continue to build on the progress they’ve made, and the sector must ensure that the momentum from the code is not lost," she says.
"The code has helped slow, but not yet reverse growth in the number of APP scams; now is not the time to lose focus. The prevention of APP fraud must remain top of the agenda for all payment service providers, otherwise there is a risk that customer harm may increase under the new framework."
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