Authorised Push Payment (APP) scams are growing at an alarming rate, with fraudsters pocketing £583.2m in 2021, a 39% increase on the previous year.

Meanwhile, in the first half of 2022, £249.1m was lost to APP scams which trick victims into transferring their money to a seemingly legitimate contact and account, but which is instead controlled by a fraudster.

In a bid to curb figures, the Payment Systems Regulator (PSR) proposed rules which would force banks to adopt a mandatory reimbursement scheme for victims.

It said the aim was to increase the current voluntary bank reimbursement rate for this type of fraud which currently sits at around 56%.

However, the proposals also state that refunds would apply to all payments over £100 and claims would be subject to an excess of “no more than £35”.

A quarter of victims ruled out of refunds

According to TSB, while it is largely supportive of the proposals, it is urging the regulator to reconsider the £100 threshold and £35 claim excess amount.

It warned that one in four victims could be excluded from getting their money back which they “simply cannot afford to lose in the current economic climate”.

TSB added that while APP scam losses of £100 or less account for just 1% of cases, it equates to £5m stolen from UK households every year.

Based on its own data, APP fraud accounts for over two fifths (44%) of all sub-£100 fraud cases.

And over half (52%) of victims within this category are aged 20-40, thereby “disproportionately affecting younger people”. One in six (17%) victims of sub-£100 fraud are over 60.

Other financially vulnerable people (11%) are also targeted via Advanced Fee Fraud (another type of APP scam) which asks them for a fee in advance for services that don’t exist.

The bank is also warning that the £100 threshold would exclude a significant number of people who fall victim to APP scams on social media platforms, websites, and apps.

It said Meta-owned platforms such as Facebook, Instagram and WhatsApp account for 80% of all purchase fraud at TSB alone while trade body UK Finance states that 70% of push payment fraud starts on online platforms.

TSB has submitted evidence to the PSR and is also calling for the £35 excess fee for claims to be scrapped.

The PSR’s consultation into the proposals closed in November and the final outcome has yet to be published. However, the Financial Services and Markets Bill which would enable the mandatory reimbursement plan is expected to receive Royal Assent by the Spring of this year which mean it could become law soon after.

‘People deserve to be protected from complex scams’

TSB has its own Fraud Refund Guarantee with a rate of 98% for reimbursing victims.

Paul Davis, director of fraud prevention for TSB, said: “We welcome these moves by government and regulators to increase customer protection from fraud. However, many people simply cannot afford losing £100 to fraud – especially in the current economic climate – and deserve to be protected from increasingly complex scams that often take place on social media sites.

“TSB’s Fraud Refund Guarantee has been protecting our customers for nearly four years and currently pays out to 98% of fraud victims, including those with losses under £100.”

A PSR spokesperson said: “We want people to be better protected if they are targeted by a scammer and our recent proposals aim to provide much greater and consistent levels of protection against APP fraud. Our proposals will place strong incentives on banks to do more to detect and prevent APP fraud in the first place.

“Under our plans, banks will be required to reimburse the majority of customers who have fallen victim to APP fraud. In line with protections for other payments and financial services, we have consulted on proposals which would see a minimum standard of protection across the board – where banks may put in place a minimum threshold of £100 and an excess of no more than £35. However, banks can of course go much further by choosing to pay the whole amount of every claim.”