WIREDGOV

A new statutory framework for the reimbursement of authorised push payment (APP) fraud victims, which will be overseen by the Payment Systems Regulator, was set to come into force on yesterday (Monday, 7 October 2024). It introduces mandatory reimbursement for victims of fraud who have transferred money from their UK bank account. While this is a welcome step in ensuring better protection for most victims, the Chartered Trading Standards Institute (CTSI) has significant concerns regarding the reduction in the maximum reimbursement cap.

Under the new scheme, the cap for reimbursement has been reduced from the initially proposed £415,000 to £85,000. This change came after lobbying from sections of the payments industry, despite a lack of clear evidence supporting the need for such a drastic reduction. CTSI believes this new cap could leave many victims—particularly those caught in high-value frauds like investment and property scams—struggling to recover their full losses.

CTSI, along with the National Trading Standards (NTS) Scams Team, participated in the consultation and expressed concerns about the potential impacts on victims. The NTS Scams Team estimates that fraud and scams result in a £5-10 billion detriment to UK consumers annually. Reducing the reimbursement threshold could disproportionately affect victims who may already be facing emotional and financial distress.

There are also concerns around the specific vulnerability of consumers when it comes to payment methods. Consumers should be particularly wary of any requests to make payments via cryptocurrency, as legitimate businesses would never insist on this form of payment. Such requests are a major red flag for fraud, and CTSI strongly advises consumers to avoid any transactions involving cryptocurrency, as they are not protected under this scheme.

Under the new rules, payment firms will need to reimburse victims within five days of their claim being approved. In complicated cases, this timeframe may extend, but firms are expected to resolve cases within a maximum of two months. These time limits are crucial to ensure that victims do not face undue delays in receiving compensation.

Victims of fraud will still be able to seek redress through the Financial Ombudsman Service if a bank rejects their initial claim, but the burden of pursuing further compensation places additional strain on individuals who have already endured the trauma of being defrauded. It is essential for consumers to understand that if their claim is rejected by their bank, they must escalate the matter to the Financial Ombudsman, which is a free service available to all.

CTSI also stresses the importance of reporting fraud within 13 months to be eligible for reimbursement under the new rules. In addition, consumers must either report the fraud to the police themselves, normally via Action Fraud, or consent to the payment service provider doing so on their behalf.

If you believe you are a victim of APP fraud, the following steps are recommended:

Contact your bank straight away using the contact information from the bank’s official website or correspondence. Do not use any links or information sent by the scammer.

Contact the police on 101.

Report the scam to Action Fraud:

Via their online fraud reporting tool.

By phone on 0300 123 2040 (phone line open Monday to Friday 8am - 8pm).

CTSI urges the Payment Systems Regulator (PSR) to review this cap within the first 12 months, as promised, and to consider restoring the original £415,000 threshold to better protect consumers. An increase in the reimbursement cap would ensure that victims, especially those caught in large-scale frauds, are adequately safeguarded.

The Chartered Trading Standards Institute (CTSI) is a national not for profit established in 1881 which supports the UK’s trading standards profession, and works to protect consumers and safeguard honest businesses. CTSI's members are engaged in delivering frontline trading standards services at local authorities and in businesses. 

www.tradingstandards.uk

Please contact CTSI Press Office: pressoffice@tsi.org.uk or 07496 254934 with any queries or to request a spokesperson.