The activation of fraud refunds is prompting UK payment companies to request more changes

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Municipal companies have called for more changes to Britain’s planned regime to require banks to reimburse victims of payment fraud after regulators angered consumer groups by reducing the compensation limit to £85,000.

The reversal by the payments regulator adds to signs that the new Labor government is encouraging financial watchdogs to water down rules designed to protect consumers and investors in a bid to boost the City and fuel stronger economic growth.

In a decision first reported by the Financial Times, the Payments Regulator said on Wednesday it was dropping the maximum fraud payouts by banks from £415,000 after finding that a lower limit of £85,000 of pounds sterling would cover almost all cases.

Consumer group Which? called the decision “outrageous”, saying it meant victims of high-value scams, such as investment scams or home buying fraud, “have their lives ruined by this huge twist”.

The eleventh-hour move, following heavy lobbying from fintech companies and pressure from government officials, came just weeks before the rules were due to start on October 7. The regulator stuck to that date, saying it would only consult on the changes for two weeks. .

“Victims of fraud will understandably be concerned about this last-minute change, which lowers the maximum amount of compensation,” said Liberal Democrat MP and Treasury spokeswoman Sarah Olney.

“We need to see more details behind this decision to shed light on whether the right balance has been struck between what the financial sector can afford and what is right for victims,” ​​Olney said, adding that it was “time” for advocacy groups social media to do more to prevent fraud.

Consumers who are tricked into making a payment to fraudsters through an online or phone scam are currently not legally entitled to any compensation. Most banks voluntarily reimburse losses in such cases, but this varies from almost 100% of cases reimbursed at some lenders to only 10% at others.

Britons lost £459.7m to such “authorised push payment” (APP) cases last year, down 5% on 2022, even as the number of such cases increased by 12%. The previous Conservative government instructed the regulator to draw up plans to enforce a consistent fraud refund regime.

The PSR said in its original consultation last year that a lower limit on fraud refunds of £30,000 or £85,000 would “exclude a significant number of victims” and there would be “significant harm to those victims defrauded over this amount”.

However, on Wednesday the regulator said new research found a lower threshold of £85,000 would still cover more than 99% of authorized volume push payment fraud cases – even if excludes 10% damage from value.

The December complaints review found that only 411 of the more than 250,000 cases involved people being defrauded of more than £85,000 and “almost all high-value fraud is made up of several smaller transactions”, making a higher limit more little efficient.

Financial groups welcomed the changes but urged authorities to go further, such as by holding social media companies accountable for the fraud that often stems from their services or by tightening eligibility for refunds.

Ben Donaldson, director general for economic crime at industry group UK Finance, said other sectors should join forces to stamp out fraud. “The best way to protect people is to prevent fraud in the first place, and that requires work from other sectors too, as our data shows that over 90% of APP fraud starts online or over the phone, through social media, fake . texts and calls,” he said.

Labor drew up plans ahead of Britain’s general election in July to make tech companies liable to repay victims of online fraud, but industry insiders said they had not been updated on this since the party came into government and was included in the king’s speech. .

Riccardo Tordera-Ricchi, head of government policy and regulation at the Payments Association, said he would call for an even lower limit of £30,000 on fraudulent refunds. “The average scam is £12,000 for businesses and less than £2,000 for individuals,” he said. “For the remaining 5%, a police report should be mandatory before proceeding.”

After the regulator proposed a £415,000 cap on mandatory repayments for fraudulent payments late last year, Treasury members called the new regime “a disaster waiting to happen”. Financial lobby groups warned of the risk that fraudulent claims would increase if the new rules encouraged criminals to exploit the system or increase consumer satisfaction.

Tulip Siddiq, the city’s minister, expressed concern about the impact of the new system on the financial sector. Her Conservative predecessor, Bim Afolami, also said there were “significant problems” with the planned regime, shortly before Chris Hemsley abruptly resigned as head of the PSR in May.