CTSI says it has ‘significant concerns’ about the decision of the Payment Systems Regulator (PSR) to reduce the amount fraud victims can reclaim from their banks, as a new statutory framework for reimbursement comes into force today (7 October).
As reported last month, the PSR decided to reduce the cap for reimbursement for victims of authorised push payment (APP) fraud from the initially proposed £415,000 to £85,000.
According to UK Finance, APP fraud – in which criminals trick consumers into sending money to bogus accounts – cost consumers £459.7m last year.
CTSI said in a statement: “The [PSR’s] decision came after lobbying from sections of the payments industry, despite a lack of clear evidence supporting the need for such a drastic reduction.
“The 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 is urging the PSR to review the cap within the first 12 months of its implementation. “An increase in the reimbursement cap would ensure that victims, especially those caught in large-scale frauds, are adequately safeguarded,” it said.
CTSI, along with the National Trading Standards (NTS) Scams Team, participated in the PSR’s consultation and expressed concerns about the potential impacts on victims. The NTS Scams Team estimates that fraud and scams result in a £5-10bn detriment to UK consumers annually.
Reducing the reimbursement threshold could disproportionately affect victims who may already be facing emotional and financial distress, according to CTSI. It also has concerns about the specific vulnerability of consumers using alternative 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,” the Institute said. “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, that 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,” CTSI said.
“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.”
CTSI recommends that victims of APP fraud should:
- Contact their 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
