Bank customers could be slapped with a £100 charge as new fraud rules are set to kick in tomorrow. The proposed changes to the compensation scheme for victims of bank fraud, due to take effect on Monday, October 7, will give banks the option to impose this excess fee.
While some banks have outright rejected the idea, others are yet to make their stance known. The scheme has already faced criticism after the maximum compensation limit was cut from an initial £415,000 down to just £85,000.
The aim is to protect countless Brits who’ve been tricked by fraudsters posing as everyone from HMRC staff to legal professionals and even police officers. The main objective is to provide a safety net for those fooled into making payments to bogus accounts.
Approximately 200,000 UK residents fall victim to what’s known as Authorised Push Payment (APP) scams each year, with combined losses estimated at around £460 million in 2023 alone. However, imposing a £100 excess for fraud under this amount could effectively deny many any compensation.
That’s because figures from UK Finance show that a significant 32 percent of APP fraud cases involve amounts at or below the £100 threshold. In the coming days, payment service providers and banks that may not impose the excess fee still need to clarify their policies to customers.
TSB, Nationwide, Virgin Money, Clydesdale Bank, Yorkshire Bank, and AIB have assured the Financial Times that they won’t be imposing any fees on customers tricked by fraudsters. On the other hand, NatWest is considering a £100 excess fee for reimbursements, but noted that: “This [will be] assessed on a case-by-case basis and with regard to the specific circumstances of each customer.”
Metro Bank, as well as payment providers Modulr and Zempler, plan to implement the full £100 charge. The new regulations stipulate that such charges can’t be applied to vulnerable individuals who are at heightened risk due to their personal situation.
TSB’s director of customer support, Nicola Bannister, revealed about a third of the bank’s fraud claims involve sums of £100 or under, often related to purchase scams via social media platforms. She stressed the impact of this sum, stating: “£100 can be a lot of money to somebody,” and has asked other banks to clearly state their positions on excess charges.
While several prominent banks like Barclays, Lloyds, HSBC, Monzo, Starling, the Co-Operative Bank, and Danske Bank haven’t disclosed their strategies on excess fees, they are looking to update their customers on changes in terms and conditions before the new rules take effect on October 7.
UK Finance has reported a 12 percent increase in the number of push payment fraud cases year on year. Under the current voluntary reimbursement scheme, banks have returned £287m to victims, equating to a reimbursement rate of 62 percent.
Rocia Concha, Which? director of policy and advocacy, voiced her opposition to the change. She warned that a lower reimbursement cap could “reduce the incentives for banks and payments firms to take fraud prevention seriously.”
She added: “The regulator has shamefully sidelined scam victims, despite the evidence showing that this decision could have a negative financial and psychological impact on them.”