New rules could leave a significant portion of fraud victims without reimbursement.
- A third of payment fraud cases will not qualify for reimbursement under new regulations.
- The Payment Services Regulator’s (PSR) rules introduce a £100 excess on fraud claims with an £85,000 cap.
- These changes may alter both fraudster behaviour and PSP fraud detection incentives.
- Stakeholders express concerns over the potential impact on consumers and fraud prevention efforts.
A substantial proportion of payment fraud victims are anticipated to forego reimbursement due to newly established rules set by the Payment Services Regulator (PSR). Scheduled for implementation on 7 October, these rules include a £100 excess on fraud claims, which effectively means that any claim under £100 is not eligible for reimbursement, while successful claims above this threshold will have the excess deducted.
In-depth analysis of the PSR’s data underscores the significance of these changes: 32% of Authorised Push Payment (APP) fraud scams fall below the £100 mark, thus rendering them ineligible for reimbursement. Furthermore, even for scams surpassing this value, the reimbursement is curtailed by £100. The regulations also introduce an £85,000 reimbursement cap, impacting larger fraudulent cases which represent around 1 in 500 cases.
The PSR’s rationale for imposing these limits is primarily to mitigate financial harm to consumers while ensuring prudence among payment services providers (PSPs). However, concerns have been raised regarding potential behavioural shifts among fraudsters, who may refocus on scams just below the reimbursement threshold, and PSPs, which might deprioritise investigations into lower-value fraud cases.
Industry stakeholders, including Rocio Concha from Which?, have criticised the decision to lower the reimbursement cap from a previously considered £415,000, arguing it diminishes incentives for banks and payment firms to prioritise fraud prevention. Concha emphasised the negative psychological and financial impacts on scam victims, calling attention to the oversight of scam victims’ interests in the regulatory process.
Adding another layer to the discourse, there have been suggestions, notably by Revolut, advocating for accountability on social media platforms where many scams originate. These platforms are urged to have a role in reimbursing victims, complementing the responsibilities of financial institutions.
The new regulations by the PSR could have complex effects on fraud prevention dynamics and victim restitution.
