Tensions between the consumer group Which? and the trade body The Payments Association remain high, with the pair at odds over their approach to tackling payment fraud as new figures show soaring scam cases.
Starting in October 2024, the Payment Systems Regulator (PSR) will implement new rules for authorised push payment (APP) scams – where fraudsters trick people into sending money online to fake payees – setting a £415,000 maximum reimbursement level to cover the money lost.
The Payments Association has turned to pen and paper a number of times in recent weeks, writing to Bim Afolami, the former Economic Secretary to the Treasury, David Geale, the interim managing director of the Payment Systems Regulator (PSR), and now Tulip Siddiq, the new Economic Secretary, in its mission to challenge these mandatory fraud reimbursement rules.
Meanwhile, Which? has continued to urge ministers to resist industry lobbying for ‘weaker scam victim protections and reduced reimbursement limits’, advocating instead for firms to take responsibility and enhance customer security.
Fraud at a high
Complaints about the banking sector are at their highest level in at least a decade, according to the latest figures from the Financial Ombudsman Service.
In the last financial year (2023/24), consumers raised 80,137 cases with the free resolution service about banking and payment products – a substantial rise from 61,995 complaints for 2022/23).
Fraud and scam cases have risen by a fifth and are now at their highest level with 27,312 complaints in the 2023/24 financial year. Around half of these cases were APP scams.
‘Letting consumers down’
Rocio Concha, Which? director of policy and advocacy, said: “These damning figures show how consumers are being badly let down by their banks in important everyday areas including credit cards, current accounts and insurance.
“It is particularly concerning to see such an increase in the number of complaints about fraud. This underlines the importance of new rules due to come into force soon that will make it mandatory for the vast majority of scam victims to be reimbursed and treated more fairly and consistently.
“Ministers must resist lobbying from small sections of the banking and payments industry that want to slash reimbursement limits and weaken protections for scam victims. These firms must be told it is time to take responsibility, stop enabling fraudsters and put in place effective security measures to protect their customers.”
Which? has also previously called requests by the Payments Association to delay the introduction of mandatory reimbursement rules “a desperate attempt from a small section of the banking industry to shirk responsibility”.
“Fraud continues to run rife in this country, affecting victims whose lives are upended by ruthless scammers. Payments firms were warned just last year that a lack of robust controls meant they posed an unacceptable risk of harm to their customers and to financial system integrity.
“The new rules will mean consumers are finally treated much more fairly and consistently by their bank and payment provider should they fall victim to a scam. Instead of seeking to amend or delay these rules, payment providers should be focusing on getting their house in order to protect customers from fraud.”
‘Better regulation’
In its recent communications, the Payments Association insists it is not contesting the principle of reimbursement but has called for changes to the regulation as currently set, including reducing the threshold to be £30,000 rather than £415,000.
According to the association, the unintended consequences of maintaining the higher mandatory limit is likely to be “irreparable damage to the UK’s fintech industry, diminishing the contribution the industry provides to the nation”.
It believes the rules will serve to “undermine competition, stifle innovation and reduce investment, and it will force smaller players to make a disorderly exit from the UK. All of this will induce greater levels of de-banking, predominately among vulnerable and underbanked consumers”.
“Fintech is the future of financial services and we are ready to play our part to contribute to the growth agenda,” said Riccardo Tordera, director of policy of The Payments Association. “But we need to see the regulatory change we have been requesting for months. Good regulation allows responsible risk-taking which, in turn, drives good behaviours. I remain convinced that this is the only way to deliver sustainable growth.”
‘Vulnerable consumers’
With just three months before the rules come into force, new research from personal finance site Finder has also highlighted a potential gap. Under the new rules, banks can still choose to make victims cover the first £100 of any fraud claim, unless the customer is classified as vulnerable.
Its study suggests only Allied Irish Bank (AIB) has confirmed it won’t impose this charge, while 19 out of 21 banks have either not decided or refused to comment. This means, Finder warns, that a quarter of fraud victims may receive no refund at all, as one in four APP fraud losses are below £100.
Finder says that without clear policies from banks, over 58,000 cases would have resulted in no refund if all companies had applied the excess last year, with Liz Edwards, money expert at Finder, commenting: “Banks need to be clear with customers where they stand.”
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