Revealed: How banks lobby to limit payouts to fraud victims who lose their savings

Banks are quietly trying to water down crucial new rules designed to protect fraud victims who have been robbed of their savings, Money Mail has revealed.

From October, banks will be forced to compensate scam victims for losses of up to £415,000 under new rules from the payments regulator.

Until now, banks have only had to sign up for a voluntary scheme to refund customers affected by scams.

However, Money Mail can reveal that bank chiefs held an emergency meeting with the city’s minister yesterday in a last-ditch effort to have the limit dramatically reduced.

Several major banks want the limit to be set at £85,000, sources said. Some smaller banks are believed to want to reduce the limit to just £30,000.

Scourge: Latest figures show fraud losses rose to £1.17bn last year, with reported cases rising by 12% in 2023

This would mean that thousands of elderly or vulnerable customers who are tricked into parting with their savings will be in deep trouble.

Almost a quarter of all money stolen by fraudsters involved cases where victims lost more than £85,000, according to figures provided to the Payments Systems Regulator last year by banking trade body UK Finance.

Money Mail calculations show that victims would have lost £115.9 million in refunds if the limit had been set at £85,000.

Meanwhile, new figures show that losses from fraud rose to £1.17 billion last year. The figures, published today by UK Finance, show that the number of reported cases will increase by 12 per cent in 2023.

Rocio Concha, director of policy and advocacy at consumer organization Which?, said: ‘It is shocking that, as this latest fraud data emerges, the government appears to be shutting out scam victims and siding with banks and financial companies that want to do so . lower reimbursement levels for authorized push payment fraud and perpetuate an unjust system in which they sit as judge and jury over victims at an incredibly painful time in their lives.

‘If the government is serious about its fraud strategy, it must support the regulator’s rules, which give the sector a strong incentive to implement more effective security measures.’

The new scam rules cover all cases of ‘push payment fraud’, where victims are persuaded or tricked into authorizing a payment to a fraudster.

This includes online shopping scams, impersonation scams, romance scams or investment scams.

The first indication that banks were unhappy with the proposed £415,000 limit on refunds came in a letter last week from 30 companies – all members of The Payments Association, an industry group – to the Treasury’s economic secretary, Bim Afolami.

They claimed the upper refund limit of £415,000 was ‘simply disproportionate’ and could harm smaller payments companies.

Instead, they argued that banks should not be forced to cover losses above £30,000, which they said was closer to the average loss.

1716328586 256 Revealed How banks lobby to limit payouts to fraud victims

Threat: Thousands of elderly or vulnerable customers tricked into parting with their savings could be left out of pocket

Consumer groups and charities that support victims say they were excluded from talks with City Minister Afolami.

They expressed concern that ministers appeared to be taking the proposals to lower the limit seriously. Money Mail understands the payments regulator was also left out of the meeting.

Mr Afolami is understood to believe there are “significant problems” with the new rules.

Which? told Money Mail it believes companies bringing the charge to reduce the limit to £30,000 are smaller payments companies – a sector that previously received warnings from the Financial Conduct Authority for not doing enough to prevent fraud on their platforms.

Wayne Stevens, national fraud lead at the charity Victim Support, warned that reducing the maximum refund to £30,000 would leave victims ‘absolutely devastated’.

He added: ‘This would be a terrible outcome for fraud victims and would undermine the whole purpose of the refund scheme.

The new rules must ensure that victims are compensated and that banks receive a financial incentive to prevent fraud.

‘Drastically lowering the threshold significantly reduces its effectiveness. Reducing the maximum level would also rule out large numbers of victims as it is unfortunately quite common for people to lose more than £30,000.”

The charity has long advocated that there is no upper limit on repayment. The Payment Systems Regulator (PSR) has indicated that it may review the maximum claim level before October if there is compelling evidence to do so. However, it has not seen one yet, Money Mail understands.

Life savings: Nearly a quarter of all money stolen by fraudsters involved cases where victims lost more than £85,000, according to figures from last year

Life savings: Nearly a quarter of all money stolen by fraudsters involved cases where victims lost more than £85,000, according to figures from last year

The regulator has already been forced by the banks to make a U-turn with regard to the limit. In September 2022, it did not propose a maximum cap but was pressured to back down after resistance from payment companies.

The £415,000 limit was proposed in August 2023. PSR said about 99.98 percent of victims would fall within the limit and therefore be protected. Those who have lost more than the cap will still be compensated up to this level and must accept losses above that.

“We believe that a limit of £415,000 strikes a balance between protecting and compensating almost all consumers and protecting PSPs (payment service providers) from very large frauds that could affect their financial viability,” the report said.

‘This should continue to incentivize PSPs to improve and enforce anti-fraud measures across all values.’

Fraud rates at smaller banks and payment companies are typically much higher than at traditional banks, the regulator warned last year.

Ten of these smaller companies were in the top 20 biggest recipients of fraud money in Britain. This means criminals use these platforms to create accounts and receive the proceeds of crime or as a way to move cash.

Consumer groups and charities supporting victims say they have been excluded from talks with City Minister Ben Afolami (pictured)

Consumer groups and charities supporting victims say they have been excluded from talks with City Minister Ben Afolami (pictured)

A PSR report published in November revealed dramatic variation in the willingness of different banks to reimburse victims. The best companies covered as much as 91 percent of the money lost, while the worst only covered 10 percent.

The number of reported scams linked to authorized push payment (APP) fraud – where payments are sent under false pretenses – increased by 12 per cent to 232,429 in 2023, according to figures from UK Finance published today.

In total, £459.7 million was lost last year, a decrease of 5 percent on the previous year.

Criminals are increasingly tempting online shoppers into so-called purchasing fraud, in which someone pays in advance for goods or services that never arrive. The number of successful attacks rose by 34 percent to 156,000 – the highest total ever recorded.

The amount lost to these types of scams rose by 28 percent last year to £85.9 million.

The number of reported romance scams has also soared, up 14 per cent last year compared to 2022. Victims lost a total of £36.5 million – up 17 per cent year-on-year.

Mr Stevens says victims of romance scams often lose large sums of money spread over a number of smaller payments. Many could therefore be left significantly out of pocket if the limit is £30,000.

Commenting on the industry’s meeting with the Government, a PSR spokesperson said: ‘We remain confident this is the right approach, going further than ever before to protect consumers and shift the focus of all businesses to strengthening their anti-fraud systems. .’

A Treasury spokesman said: ‘It is important that victims of fraud are compensated. While the PSR is responsible for the new rules, the government is aware of the serious concerns raised by the industry and we encourage the PSR to join in.”

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