Starting Oct. 7th, 2024 UK Bank have to refund scam victims!

mandatory reimbursement regime

Starting Oct. 7th, 2024 UK Bank have to refund scam victims!

Today,  October 7, 2024, the UK Payment Services Regulator (PSR) is set to implement new mandatory reimbursement protections for victims of Authorised Push Payment (APP) fraud. These rules aim to ensure that victims of bank transfer scams, where people are tricked into sending money to fraudsters, are reimbursed quickly and consistently by their UK banks.

The PSR implemented the rules after  the number of cases of this type of fraud rose by 12% to 232,429 in 2023, with losses totalling £459.7m according to UK Finance.

In detailed UK rules are as follows:

  • Mandatory reimbursement: Payment service providers (PSPs) must reimburse victims of APP fraud, usually within five business days of a claim, unless the victim acted with “gross negligence.” Vulnerable consumers, however, cannot be denied reimbursement on these grounds.
  • £85,000 cap: Victims can be reimbursed up to £85,000 per claim. This aligns with the Financial Services Compensation Scheme (FSCS) limit. Some firms may offer higher reimbursement, but this is the mandatory minimum (originally a the law provided for a higher mandatory minimum, but the banking lobby was successful in reducing the amount. The watchdog has reduced the maximum compensation from a previous proposal of £415,000. It said the new cap of £85,000 would cover more than 99% of claims.).
  • Optional £100 excess: Firms may apply an excess of up to £100 per claim, though this does not apply to vulnerable individuals.

Once a bank or payment company had refunded a customer, it could claim half back from the financial institution the fraudster used to receive the stolen money.

These changes aim to incentivize banks and PSPs to prevent APP fraud and offer victims better protection.

Note: This mandatory refund is only applicable when the transfer was done from a UK bank to another UK bank (no  international transfers are covered. In addition no transfers involving cryptocurrencies are covered.