However, bank customers still need to be cautious when making transfers, as banks are allowed to reject claims if the customer was “negligent”. This clause might apply if you didn’t pay attention to any bespoke transaction-specific warnings your bank gave you.
APP fraud occurs when a victim is tricked into sending money from their bank account to an account controlled by a fraudster. They are called “authorised” scams because, at some point, the victim will have to approve the transaction with their bank.
Most APP scams start with an impersonation. Scammers typically impersonate banks, police, utility providers, HMRC, friends or family.
APP scams cost individuals and businesses about £459.7m in 2023, according to UK Finance. But only 62% of this (equating to £287.3m) was returned to victims.
The new rules introduced by the Payment Systems Regulator (PSR) cover scams where people have sent the money by UK bank transfer, either by Faster Payments or CHAPS. All UK banks, building societies, and e-money firms need to adhere to the rules.
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Last month saw the reimbursement limit covered by the new rules reduced to £85,000 from the original limit of £415,000 set out last December. Once a bank or payment company has given the customer a refund, the financial institution can then claim half of the money back from the bank used by the criminal to receive the cash.
Previously, consumers had to rely on the ‘contingent reimbursement model’ (CRM), a voluntary arrangement by some banks to refund victims. But under this scheme, how likely you were to get a refund depended on which bank you were with.
Banks rule out full refunds
Under the rules, financial firms have the option to charge an excess of up to £100 on each claim, except where a victim is deemed ‘vulnerable’.
Research by personal finance comparison site Finder found that only four out of 21 major banks have decided to definitely cover the first £100 of any APP fraud.
Finder contacted all the major banks in the UK and looked through their updated website information or T&Cs, finding only four have committed to covering the first £100. These are Nationwide Building Society, Virgin Money, TSB and AIB.
Currently, five banks – HSBC, First Direct, Lloyds, Halifax and Bank of Scotland – have said they will not cover fraud claims below £100, with the rest saying they “may” cover them or will judge each claim on a case-by-case basis. Starling Bank says it may apply an excess of £50 rather than £100.
Liz Edwards, money expert at Finder, said: “Our research reveals the refund lottery that fraud victims are now facing. Victims’ protection has been squeezed at both ends. When the upper refund limit was cut to just £85,000, many in the industry, including the PSR, justified this by saying it would still cover over 99% of claims. But because so many banks are now saying they won’t cover – or may not cover – the first £100, that 99% must surely be lower.
“Based on 2023 fraud figures, more than 58,000 cases would have resulted in no refund if all companies had applied the excess, and now only four of the major providers have confirmed they won’t. £100 is a lot of money to many people. It doesn’t help that 12 banks said they might apply it – customers don’t know where they stand.”
Bank scams have become increasingly sophisticated in recent years, as explained in this first-person experience.
