The UK has rolled out a mandatory bank transfer fraud refund scheme, making it the first country to do so. The scheme, led by the Payment Systems Regulator (PSR), aims to tackle authorised push payment (APP) fraud by reimbursing victims up to £85,000 per claim. This move is part of broader efforts to combat rising online fraud cases.
Effective from this week, more than 1,500 banks, fintechs, and payment firms in the UK are required to participate in the new fraud refund scheme. Under this initiative, victims of authorised push payment fraud will be eligible for reimbursements up to £85,000 per claim. The programme seeks to resolve most refund cases within five business days, marking a significant step in consumer protection.
While entities can impose a £100 excess on claims, effectively ruling out claims under this amount, those identified as vulnerable are exempt from bearing this excess charge. Additionally, firms choosing to levy such charges are required to communicate this clearly to affected customers.
Institutions now have additional leeway to investigate suspicious transactions. The Treasury’s recent decision allows banks up to four working days to scrutinise potential fraud cases, an increase from the previous one-day period. This extension provides banks with more time to identify and address fraudulent activities before they occur.
In response to industry lobbying, the PSR amended the initial refund cap from £415,000 to £85,000. This change aligns with feedback from the fintech sector and Treasury concerns over potential impacts on the payments industry. However, the PSR still faces criticism from consumer advocacy groups who argue that the revised cap may diminish incentive for robust fraud prevention.
TSB Bank, for example, successfully implemented its fraud refund guarantee scheme five years ago, reimbursing nearly all APP scam victims. The move to a mandatory programme marks the next evolution in fraud prevention strategies, with hopes of broader industry adoption.
The PSR is committed to conducting a thorough review of the scheme after one year. Consumer groups and industry bodies alike will be monitoring the outcomes to ensure it effectively addresses the complexities of APP fraud.
This refund scheme is a pivotal effort to protect consumers from significant financial losses due to fraud. Although not exhaustive, the scheme provides a critical layer of security for those affected.
The UK’s initiative to introduce a bank transfer fraud refund scheme reflects a significant step towards strengthening consumer protection against APP fraud. With its implementation, there is an expectation for improved fraud prevention measures across the industry. Monitoring and evaluation will be key to ensuring the scheme’s long-term success and adaptiveness to evolving fraud threats.
