Complaints about fraud and scams have reached an all time high as the UK regulator is poised to slash the amount banks must refund fraud victims.
A total of 8,734 consumers made complaints about financial fraud and scams between April and the end of June, according to the Financial Ombudsman Service (FOS), the highest since records began to be collated in 2028.
More than half of the complaints were about fraud in customer-approved online bank transfers. Also know as authorised push payments (APP) scams, these are cases where customers are tricked into approving an online bank transfer to a fraudster.
Some victims have inadvertently paid fraudsters via debit and credit cards after spotting supposed investment opportunities on social media, the ombudsman said.
FOS also warned that the crimes are becoming “more complex and convincing”, with some frauds involving multiple banks and professional representatives.
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Some of these scams are covered by a voluntary reimbursement code used by banks, with a mandatory scheme set to start in October. However, regulators are reportedly planning to reduce the maximum fraud payout that banks must pay to victims from £415,000 to £85,000 after facing pressure from ministers and payment firms.
Treasury insiders had called the planned new rule, set to come into effect on 7 October, “a disaster waiting to happen”, according to the FT, who first reported the story.
The Payment Systems Regulator (PSR) previously said: “The maximum level of reimbursement has attracted a particularly high level of feedback, and involves difficult trade-offs”, and it “may consult on revising the level ahead of October if there is convincing evidence to do so”.
Industry bodies such as UK Finance had pushed for the lower limit amid wider concerns that the £415,000 compensation limit was far too high and could encourage fraudsters to set up fake online deals with an accomplice, claiming maximum compensation from the payment provider and sharing the proceeds.
Consumer body Which? has criticised the move, claiming it will only benefit fraudsters.
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Rocio Concha, Which? director of policy and advocacy, said: “It’s outrageous that the payments regulator is set to water down vital scam protections weeks before they were due to take effect and that this move follows months of lobbying from firms that refuse to take fraud seriously.
“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. This makes it more likely that scammers will continue to thrive on some payment platforms.”
APP fraud is the most common type of financial scam in the UK, costing the economy roughly £459.7 million in 2023 alone.
Abby Thomas, chief executive and chief ombudsman of the FOS, said: “Being a victim of a fraud and scam is a horrendous experience — not just financially, but emotionally too. That’s why it’s disappointing to see complaint levels rising to even higher levels.
“We often hear from people embarrassed to have fallen victim to a fraud, but these crimes can be complex and incredibly convincing, and nobody should be afraid to come forward.”
Scams can be sophisticated, but if it sounds too good to be true, it probably is. Find out how to spot the warning signs of investment, pension and other financial scams.
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