In a bid to combat the rising tide of Authorised Push Payment (APP) fraud, the Payment Systems Regulator (PSR) has rolled out new rules designed to expedite and simplify the reimbursement process for victims. APP fraud, a rampant scam where victims are deceived into voluntarily transferring money from their bank accounts, has seen alarming growth in recent years. The new regulations, effective immediately, apply specifically to domestic transfers within the UK. These encompass transactions moving money between UK bank accounts via the Faster Payments system or Chaps.
The newly implemented rules do not extend to funds transferred overseas, a limitation that may concern some consumers. The PSR has established a cap of £85,000 for refunds, although individual financial institutions retain the discretion to exceed this limit in their reimbursements. Data from 2023 indicates that 411 cases exceeded this cap, with an average loss of £175,000 per incident. Despite the cap covering 99% of APP fraud claims, only 90% of the lost funds will be reimbursed under the new guidelines.
Smaller fintech companies have emerged as unexpected hotspots for fraudulent transactions. Surprisingly, these entities accounted for just over half of all scam activities in 2023, even though they handled less than 10% of all Faster Payments. This statistic underscores the disproportionate impact APP fraud is having on smaller financial institutions.
Fraud victims now have a window of 13 months from when they first become aware of the scam to report it to their payment provider. Once reported, the payment firm is obligated to reach a decision within 35 business days to ensure prompt reimbursement. This procedural timeline aims to eliminate unnecessary delays and provides a structured framework for both consumers and financial institutions.
Investment scams have constituted a significant portion of the financial losses experienced by Britons in recent times. In the first half of 2024 alone, investment scammers swindled £56 million from unsuspecting individuals, representing a quarter of the £214 million lost to APP fraud overall. Although investment scams accounted for only 4% of cases during this period, they resulted in substantial monetary losses, highlighting their impact on victims' finances.
Prior to the enforcement of these new rules, a voluntary code facilitated reimbursement in approximately 66% of cases. The introduction of mandatory regulations is expected to enhance this figure by ensuring more consistent outcomes for fraud victims. However, some stakeholders have expressed disappointment over the PSR's decision to set the refund cap at £85,000, rather than the previously indicated £415,000.
The discrepancy between expectations and reality regarding the refund cap has prompted discussions about whether the current measures sufficiently address the needs of high-value fraud victims. Critics argue that while the cap covers a vast majority of claims, those who suffer significant financial losses may still find themselves inadequately protected.