The Payment Systems Regulator (PSR) announced the reimbursement limit will not be the £415,000 amount it initially said victims could claim back in December 2023.
It said the “carefully balanced decision” would cover 99% of all cases of APP scams. This type of scam occurs when a fraudster misleads victims into sending them money by imitating a trusted business or person.
The PSR noted the lower amount than previously mooted “provides significant protection to fraud victims and strikes an appropriate balance having regard to the PSR’s innovation and competition objectives.”
It will also give firms “strong financial incentives to continue to make improvements to their fraud prevention controls”, the statement read.
The PSR also said a final policy statement would be published next week with the full reasoning, but insisted this amount for payment systems “works well for everyone”.
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Plans to reduce the APP refund amount were revealed by the PSR earlier this month, ahead of the implementation of new rules on 7 October.
‘Scam is often a series of smaller payments’
One of the factors for the decision referred to in the 4 September statement was that whenever there is a loss of £415,000 or more, the scam is often a series of smaller payments that make up the total figure.
The change of policy followed the PSR “listening to concerns of the reimbursement amount” from payment providers and the Bank of England.
One body that disagreed with a higher refund cap was the Payments Association, which requested the legislation to be delayed by a year, to enable the sector to get its technology and policies up to speed.
Smaller businesses would also be making a “much bigger adjustment” to commit to a £415,000 payout for a scam victim, according to the PSR.
However, victims of the crime appear to face a lottery on their refund amount, depending on who they bank with, as smaller businesses were less giving with full reimbursements than the larger alternatives.
Just 3% of cases reported to AIB are fully reimbursed, while Monzo fully repaid just a tenth of cases. On the other hand, Nationwide Building Society paid back 96% of its customers in full who experienced an APP scam.
When the policy change was set out earlier this month, Rocio Concha, director of policy and advocacy at Which?, slammed the “watered down” protection to fraud victims as “outrageous.”
‘Decision puts us all at greater risk’
Following the confirmation of the policy, Concha said: “This decision puts all of us at greater risk of being targeted by criminals because it reduces the incentives for banks and payments firms to take fraud prevention seriously.
“The regulator has shamefully sidelined scam victims, despite the evidence showing that this decision could have a negative financial and psychological impact on them.
“Instead, it caved into a lobbying campaign from some firms in the payments industry, some of which have already been warned by the FCA for their role in facilitating fraud.”
Concha added: “People don’t fall victim to scams because they’re careless, but because they’re ruthlessly manipulated.
“As the disastrous consequences of this decision for scam victims become apparent, the regulator must carefully monitor its impact and be ready to intervene with better protections for victims along with stronger financial incentives for banks and payments firms to tackle fraud.”
