MPs warned that new fraud compensation schemes would be “immature” unless regulators act more vigorously to protect consumers.
Rules being considered by the Payments System Regulator (PSR) would require banks and building societies to fully compensate victims of Authorized Forced Payments (APPs) if the loss exceeds £100.
Forced payment scams are common, where someone is tricked into making a payment, usually impersonating them. By 2021, up to 196,000 consumers have lost £583m due to such scams, according to UK Finance.
In 2019, a code of voluntary compensation for victims was developed, to which ten banks and other payment service providers (PSPs) have now joined. Despite the code, many victims have difficulty getting their money back from banks.
The Parliament Select Committee on Finance has previously called for the code to be made mandatory amid growing harm from app fraud. The Financial Services and Markets Act, which is currently before Parliament, requires the PSR to establish a mandatory application fraud refund system through the Fast Payments Scheme.
But lawmakers on the Treasury’s select committee remain concerned that new plans by financial regulators that are preparing to help consumers and victims are not addressing the problem properly.
Are you wondering why fraud amounts under £100 are not fully refunded when nearly one in four app scams involve amounts under £100.
Some banks have argued that levels should be set between £200 and £1,000, warning that mandatory redemption could lead to moral hazard. However, they provided “very limited evidence” to support this, the PSR report said.
TSB Bank, which launched a fraud-guarantee refund scheme in 2019, said it found no evidence of “moral hazard” or increased consumer negligence as a result.
The regulator says the £100 threshold is the minimum fee level for credit card fraud, a figure last updated in 1983.
PSR said that consumers who show “gross negligence” usually do not need to be reimbursed. The Financial Ombudsman is said to have defined gross negligence.
MEPs fear further delays in refunds from fraud victims.
Harriett Baldwin, chairman of the finance committee, said: “Fraud is on the rise and our constituents are being robbed. Regulators need to quickly get on their feet and deal with all these exceptions and criteria. We are keeping the pressure high so that the implementation is not delayed.”
The Ombudsman said he would introduce a new banking team to expedite the handling of complaints. The average waiting time for a decision has decreased from 6.4 months in 2021-2022 to 3.7 months at the end of last year.
Source: I News
I am Moises Cosgrove and I work for a news website as an author. I specialize in the market section, writing stories about the latest developments in the world of finance and economics. My articles are read by people from all walks of life, from investors to analysts, to everyday citizens looking for insight into how news will affect their finances.