Upcoming changes to fraud reimbursement policies prompt concern.
- One-third of fraud cases won’t be covered under new rules.
- The rules set a £100 minimum and £85,000 cap on claims.
- Critics highlight potential shifts in fraudster behaviour.
- Financial and psychological impacts on victims are debated.
Significant amendments to fraud reimbursement policies are set to come into effect next week, sparking widespread discussions about their implications. The Payment Services Regulator (PSR) has announced new rules for Authorised Push Payment (APP) scams, introducing a £100 excess on fraud claims and capping reimbursements at £85,000. Consequently, cases involving sums below £100 will not qualify for reimbursement, and even in eligible claims, the reimbursement will be reduced by £100. For instance, a successful fraud claim of £110 would result in a mere £10 reimbursement, whereas a claim of £500,000 would lead to an £85,000 payment.
According to PSR data, scams valued under £100 account for about 32% of all APP scams, while those exceeding £85,000 make up approximately one in every 500 cases. The intention behind establishing these limits is to minimise financial damage to consumers while ensuring that payment service providers (PSPs) maintain vigilant procedures. However, concerns have been raised about the strategy’s potential to skew fraudster behaviour towards more scams around the £100 threshold and reduce the motivation for PSPs to address low-value fraud.
The regulator acknowledged the possibility that a fixed claim excess could encourage PSPs to prioritise the detection and prevention of higher-value fraud. As a result, there might be diminished efforts to tackle fraud below the set threshold, which could lead to an increase in such incidents. “A maximum claim excess of £100 is an effective way to promote customer caution,” the PSR stated. The regulator believes that, despite other excess options potentially providing better solutions against moral hazards, a fixed £100 excess stands as the optimal choice when considering various factors.
Despite these measures, the regulator mentioned that transactions under the £100 threshold could still be deemed valid if the cumulative claim value exceeded £100, provided multiple related transactions were involved. Initially, the PSR considered capping reimbursements at £415,000 but ultimately opted for the lower figure, sparking warnings from consumer groups. They argue that this decision could pose severe harm to numerous consumers affected by scams involving six-figure sums.
Rocio Concha, the Director of Policy and Advocacy at Which?, criticised the lower cap, suggesting it would reduce the motivation for banks and payment firms to prioritise fraud prevention effectively. “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 commented. Moreover, fintech leader Revolut has advocated for social media firms to bear responsibility for reimbursing victims of scams originating from their platforms.
The newly introduced rules present a complex challenge, balancing consumer protection with the potential consequences of altered fraud dynamics.
