Banks Must Refund Fraud Victims But Excess Charges Will Apply

In a major shift to protect fraud victims, UK banks will be required to refund customers who have fallen victim to scams, following new rules introduced by the Payment Systems Regulator (PSR). These rules aim to provide better protection and faster redress for victims of Authorised Push Payment (APP) fraud, a type of scam where individuals are tricked into transferring money to fraudsters.

Under the new regulations, which come into place on Monday (October 7), banks and payment providers must refund victims of APP fraud in most cases, as long as the victim is deemed to have taken reasonable care in preventing the fraud.

PSR has reduced the maximum compensation from a previous proposal of £415,000 to a new cap of £85,000, which could cover more than 99% of claims.

Banks might not be as out-of-pocket as it may seem under the new regulations, however.

Once they have refunded a customer, a bank or payment providers could claim back half the amount from the financial institution the fraudster used to receive the stolen money.

However, there is a catch. Some banks have introduced a £100 excess fee for the processing of refunds. Much like an insurance deductible, this fee will be the victim’s responsibility, even if they qualify for a refund.

For many customers, especially those targeted by smaller-scale scams, this excess fee could be a significant proportion of the total loss. While the intention behind the fee is to encourage better vigilance among bank customers, it raises the question of whether victims are being penalised for falling prey to what are becoming increasingly-sophisticated scams.

Not all banks and payment providers are intending to charge an excess but, so far, only a handful have said they won’t introduce this fee. TSB, Nationwide, Virgin Money, Clydesdale Bank, Yorkshire Bank and AIB have so far insisted they won’t pass on the charge to their customers.

NatWest is uncommitted at present, and say they will assess on a ‘case-by-case basis and with regard to specific circumstances of each customer’.

Others, including Metro Bank and payment providers Modulr and Zempler, say they will impose the £100 excess, but the new regulations prevent them from being applied to vulnerable customers who are at a heightened risk of being scammed.

Those yet to announce their intentions include household names such as Barclays, Lloyds, HSBC, Monzo, Starling, the Co-Operative Bank, and Danske Bank. These banks will reach out to their customers with revised terms before October 7.

More than £459million was lost to push payment fraud in 2023 according to UK Finance’s Annual Fraud report. Under the voluntary reimbursement system, banks returned £287.3m to victims last year, equating to a 62% refund rate, up from 59% in 2022.

APP scams continue to rise, however, and with a 12% increase since 2022 there’s no sign that these callous scams are set to end any time soon. In fact they are becoming more sophisticated, meaning innocent bank customers need to be vigilant to protect themselves.

To minimise the risk of falling victim to fraud and avoid the excess fee, it’s important to know how to protect yourself.

You should:

– Always verify the identity of the person or organisation requesting a payment.
– Never share personal banking details with anyone unless you are certain of the recipient.
– Use your bank’s fraud detection and security features.
– Contact the bank or firm you believe you are dealing with to check on any payment details.
– Speak to your own bank for advice if you have any suspicions.

To learn more about APP fraud and what you can do to protect yourself, you can read our article ‘What Is Authorised Push Payment Fraud?’ by clicking here.

If your bank has declined your refund, or your scam led to you losing more than £85,000 and you cannot get a full refund, Barings Law are here to help.

Our team of legal experts will act on your behalf, to offer you the best chance of recovering your stolen money via a compensation claim.

You have nothing to lose, and there is no financial risk as our work is carried out on a no-win no-fee basis. If your claim is not successful, you won’t have to pay anything for our services.

All you need to do is click the button below to start your claim. Once we have assessed your case, we’ll contact you with our plan of action to retrieve your money.