Lloyds, HSBC, NatWest, and Nationwide have implemented a new payout rule starting today. Previously, many bank customers have relied on a voluntary code for protection. The new rule requires banks to reimburse individuals who have been deceived into transferring money to a fraudster, unless the customer has been grossly negligent. A reimbursement limit of £85,000 has been put in place, though banks have the option to repay higher amounts. These protections apply to transfers to and from UK bank accounts made from October 7 onwards.
The move has been lauded as a significant step forward in combating fraud. In recent years, there has been a surge in criminals posing as reputable institutions to scam people out of their money, with scams increasingly becoming more sophisticated. Figures from UK Finance show a 12% annual increase in authorised push payment (APP) cases, reaching 232,429 cases last year with reported losses totaling £459.7 million. The majority of these cases were related to purchase scams, where victims pay for goods or services that are never received, mainly occurring online.
According to UK Finance, 76% of APP fraud cases originated from online sources, highlighting the importance of increased protection in digital transactions. The new mandatory reimbursement limit, initially expected to be £415,000, has been set at £85,000 by the Payment Systems Regulator. Consumer group Which? has expressed concerns that victims of high-value fraud might face challenges in seeking reimbursement, especially in cases like investment scams or property transactions. Notably, victims whose losses exceed £85,000 can turn to the Financial Ombudsman Service for further assistance, with a compensation limit of £430,000.
While the new rules aim to enhance consumer protection, there are warnings to remain vigilant as fraudsters may exploit the changes to deceive individuals. Advances in technology have made it harder to spot fake communications, but tools like AI are also being used to combat scams. Not-for-profit organisation Get Safe Online introduced the Ask Silver tool, powered by AI, to help users verify suspicious texts, emails, or websites instantly. Banks are advocating for a unified effort across sectors and borders to tackle fraud, emphasizing the need for preventative measures to safeguard the public and prevent financial losses.
In a bid to further crack down on fraud, the Government has proposed new legislation to allow banks additional time to investigate suspect payments. However, concerns have been raised about the potential for increased complicit fraud due to the mandatory reimbursement requirement. Individuals found complicit in scams will not be entitled to refunds and may face legal repercussions. The evolving landscape of financial crimes necessitates a collaborative approach to combat fraud effectively and protect consumers from falling victim to scams.