The maximum reimbursement limit for victims of bank transfer scams has been slashed ahead of new rules coming into force next month, in a move that consumer campaigners have branded as “disastrous”.
The previous maximum reimbursement value had been put at £415,000 under the plans to force banks to compensate people who have been tricked into transferring money to a fraudster.
But on Wednesday, the Payment Systems Regulator (PSR) confirmed the limit will now be set at £85,000.
Mandatory rules will come into force from October 7, requiring banks to reimburse customers who are victims of bank transfer scams unless the customer has been grossly negligent.
But with just weeks to go before the changes for victims of authorised push payment (APP) scams, the PSR announced a consultation into the new lower cap.
As the disastrous consequences of this decision for scam victims become apparent, the regulator must carefully monitor its impact and be ready to intervene with better protections for victims along with stronger financial incentives for banks and payments firms to tackle fraud
Rocio Concha, Which?
Rocio Concha, Which? director of policy and advocacy, said following the confirmation of the new cap on Wednesday that the PSR had “caved in”.
She said: “This decision puts all of us at greater risk of being targeted by criminals because it reduces the incentives for banks and payments firms to take fraud prevention seriously.
“The regulator has shamefully sidelined scam victims, despite the evidence showing that this decision could have a negative financial and psychological impact on them.”
She continued: “People don’t fall victim to scams because they’re careless, but because they’re ruthlessly manipulated.
“As the disastrous consequences of this decision for scam victims become apparent, the regulator must carefully monitor its impact and be ready to intervene with better protections for victims along with stronger financial incentives for banks and payments firms to tackle fraud.”
The regulator said it had given “careful consideration to all the feedback and information received”.
The PSR has said that more than 99% of APP claims by volume will still be covered by the reimbursement cap, adding that this will also give firms strong financial incentives to continue to make improvements to their fraud prevention controls.
The regulator said its decision had been “carefully balanced” to provide significant protection to fraud victims while striking an appropriate balance having regard to its innovation and competition objectives and making sure that payment systems work well for everyone.
It added that in announcing the decision on Wednesday, it wanted to provide clarity on the limit before the reimbursement requirements take effect, so that people benefit from the protections from that date.
The £85,000 limit applies to Faster Payments and the PSR said the Bank of England, as the operator of another payment system called Chaps, has carefully considered the feedback made in relation to Chaps as part of the same consultation.
The PSR said the Bank has decided that the maximum reimbursement for Chaps will be £85,000.
In making this decision, the Bank has given weight to the benefits to industry and consumers of having consistency of limits across the two payment systems and the Bank is committed to reviewing this limit within 12 months, the PSR said.
The PSR has previously said the cap of £85,000 would be in line with the Financial Services Compensation Scheme (FSCS) limit which is “well understood” by customers.
Many banks are currently signed up to a voluntary reimbursement code, but concerns have previously been raised that customers face a “lottery” in getting their money back.
The Financial Ombudsman Service (FOS) said recently that scam-related complaints have 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.