Warning as scam complaints hit six-year high

The official payment watchdog has considerably scaled back proposed rules designed to force banks and payment companies to refund fraud victims.

Under the new scheme, victims will be refunded losses of up to £85,000.

But the Payment Services Regulator had previously said the maximum would be £415,000.

It comes after pressure from financial firms to reduce it to that level, but consumer group Which? said the new plans were “outrageous”.

When criminals dupe their victims into sending them money by pretending to be a legitimate company, such as a law firm or a tradesman, or by selling goods that do not exist, this is known as authorised push payment fraud.

There is currently no requirement for banks to refund victims of this kind of fraud. Although many of them do so voluntarily, others are more reluctant.

The new mandatory rules set out by the regulator are scheduled to come into force on 7 October.

It is consulting on its scaled-back plans for two weeks, and will give a decision on the final maximum amount of compensation by the end of September.

The proposed threshold was brought down after objections from the financial industry that it could cause problems for smaller firms.

The proposed new cap would cover more than 99% of claims, the regulator said.

Out of more than 250,000 cases in 2023, there were 18 instances of people being scammed for more than £415,000, and 411 instances where they lost more than £85,000.

But Which? said it was “outrageous” that vital scam protections were being watered down weeks before they were due to take effect.

“This move follows months of lobbying from firms that refuse to take fraud seriously,” Rocio Concha from Which? said.

It comes after new figures showed that disputes over fraud and scams hit their highest level for at least six years.

Thousands of complaints about cases were made to the financial ombudsman between April and June, with nearly half upheld, the organisation said.

Banks also warned about people being exposed to potential scams as they organise post-summer life admin.

Campaigners say that some people are being exposed to scams as they fill their work and social diaries following a summer break.

Being busy and distracted can mean people are less likely to double-check messages are genuine, according to the Take Five to Stop Fraud campaign, run by banking trade body UK Finance.

So, the advice is to step back to consider requests for money or personal details before being tricked.

The Financial Ombudsman Service (FOS) deals with unresolved disputes between providers and their customers.

It said that consumers lodged 8,734 complaints in April, May and June – the highest three-month total since it started collecting comparable data in 2018.

Some fraud victims have inadvertently paid fraudsters via debit and credit cards after spotting supposed investment opportunities on social media, the ombudsman said.

Other factors leading to the rise in cases include multiple claims when various banks are involved in the process. Professional claims management companies have also brought an increasing number of cases.

Some 44% of complaints about scams and fraud were upheld in consumers’ favour by the ombudsman, compared with 37% for other types of gripes.

Abby Thomas, chief executive and chief ombudsman of the FOS, said: “Being a victim of a fraud and scam is a horrendous experience – not just financially, but emotionally too. That’s why it’s disappointing to see complaint levels rising to even higher levels.

“We often hear from people embarrassed to have fallen victim to a fraud, but these crimes can be complex and incredibly convincing, and nobody should be afraid to come forward.”

• The Financial Conduct Authority regulates financial services in the UK
• Customers can complain about any regulated firm to the Financial Ombudsman Service, which can settle disputes and order firms to pay compensation
• Most High Street banks have signed up to the Contingent Reimbursement Model code designed to protect customers from authorised push payment (APP) scams
• The CRM will be superseded by the Mandatory Reimbursement Requirement from 7 October 2024
• Unlike the CRM, which is a voluntary code, the new regulations are obligatory
• They will cover the vast majority of UK money transfers up to a certain amount, with the exception of international transfers or those involving cryptocurrencies
• Refunds will be split 50-50 between sending and receiving firms