Exact amount banks must refund scam victims under new rules slashed by over £300,000

The maximum amount much is covered when losing money to a scam has been cut from £415,000 down to only £85,000 under new scam protection rules.

The Payment System Regulator (PSR) confirmed today the amount banks and building societies will need to cover per claim if money is lost to an APP scam. APP scams happen when someone is tricked into sending money to a fraudster posing as a genuine payee. This type of scam has quickly become one of the most "significant" types of fraud in the UK accounting for nearly £460million in losses last year according to UK Finance.

Under new rules coming into place from October 7, firms will need to reimburse victims of APP scams for the amount lost within five business days. However, the maximum amount has been under consultation with the initial proposal being £415,000 per claim. This was in line with how much you can receive from a complaint to the Financial Ombudsman Service.

In a review of 250,000 high-value scams, the PSR found 18 instances of people being scammed for more than £415,000 in 2023, and 411 instances of more than £85,000. The economic regulator announced a consultation into the change earlier this month which lasted only a mere two weeks.

In a statement released today, the PSR said: "This was a carefully balanced decision – which provides significant protection to fraud victims and strikes an appropriate balance having regard to the PSR’s innovation and competition objectives and making sure that payment systems work well for everyone."

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However, the significant reduction in the amount covered for APP scams has sparked anger from consumer groups. Rocio Concha, director of policy and advocacy at Which? says the move has "shamefully sidelined scam victims". They also noted that the move puts more Brits at "greater risk" of being targetted by criminals as it "reduces the incentives for banks and payments firms to take fraud prevention seriously".

They 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. Instead, it caved into a lobbying campaign from some firms in the payments industry, some of which have already been warned by the FCA for their role in facilitating fraud.

"People don't fall victim to scams because they're careless, but because they're ruthlessly manipulated. As the disastrous consequences of this decision for scam victims become apparent, the regulator must carefully monitor its impact and be ready to intervene with better protections for victims along with stronger financial incentives for banks and payments firms to tackle fraud." The PSR is due to publish a final policy statement explaining the reasoning behind its decision next week.

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