New reimbursement regulations set to take effect will leave many fraud cases uncovered, sparking concerns and discussion.
- Starting next week, changes in fraud reimbursement rules will mean a third of cases won’t be covered, influencing fraudster behavior.
- The new Authorised Push Payment rules introduce a £100 excess and a £85,000 cap, altering reimbursement for fraud victims.
- Regulatory limits aim to reduce consumer financial harm but may shift fraud patterns and investigation incentives.
- Key voices express worry over the psychological and financial impacts on scam victims due to reduced compensation.
Starting from October 7, updated regulations on fraud reimbursement will significantly impact how fraud cases are handled. The Payment Services Regulator (PSR) has introduced new Authorised Push Payment (APP) rules. These include a £100 excess on fraud claims and a cap of £85,000 on reimbursement. As a result, claims under £100 will not qualify for reimbursement, and those exceeding £100 will suffer a £100 deduction. This means, for example, a claim of £110 will yield a reimbursement of just £10, whereas a £500,000 claim will be capped at an £85,000 reimbursement.
According to data from the PSR, 32% of APP scams fall below the £100 reimbursement threshold. These new financial parameters have sparked a debate on whether they might inadvertently direct fraudsters towards scams near the threshold, while also potentially making payment services providers (PSPs) less inclined to address lower-value fraud.
The regulator has stated that the limits are designed to minimize consumer financial harm and maintain caution in the system. However, there’s a concern that they could encourage fraud migration to lower-value transactions, as PSPs might prioritize resources for higher-value fraud detection and prevention.
An option considered by the PSR was a £415,000 reimbursement cap, which some consumer groups argue might mitigate harm to victims of large-scale fraud. The final decision, however, was a lower cap, prompting criticism from consumer advocates such as Rocio Concha from Which?. Concha argues this decision diminishes banks’ and payment firms’ incentives to thoroughly prevent fraud.
Fintech representatives have also voiced concerns. Recently, a spokesperson for a leading fintech firm suggested that companies behind the digital platforms where scams originate should bear some financial responsibility for reimbursement. This suggestion aligns with growing calls for a more shared approach to tackling fraud.
Overall, the introduction of these regulations reveals a complex balancing act between consumer protection and effective fraud mitigation.
