UK Regulator Proposes Lower Reimbursement Cap for Bank Fraud Victims

The Payment Systems Regulator suggests slashing fraud victim payouts to £85,000, sparking debate on compensation adequacy.

A proposal has been made by the UK's Payment Systems Regulator (PSR) to lower the maximum payout limit for victims of fraud from £415,000 to £85,000. On October 7, the new cap is scheduled to go into effect after a quickly arranged 14-day consultation. Based on an analysis showing that the majority of fraud cases involve sums below the new ceiling, the PSR made its conclusion. To be more precise, out of over 250,000 scams, just 18 went over £415,000, although 411 incidents went over £85,000.

The suggested limit, according to David Geale, managing director of the PSR, tackles both industry concerns and consumer protection by covering most authorised push payment (APP) schemes. Payment companies and banks are concerned that a greater threshold would encourage "complicit fraud," in which offenders take advantage of high reimbursement rates.

At the moment, banks willingly pay back victims of APP fraud, though at different rates. AIB only compensated 9% of client losses last year, compared to 88% by TSB. The goal of the PSR's new reimbursement policy is to increase consumer confidence and promote stronger fraud prevention practices.

Legal experts, nevertheless, wonder if the lower cap will spur banks enough to improve their fraud detection systems. A higher pay level, according to Catherine Hammerson-Jones of Rosenblatt, would incentivize banks to enhance their fraud monitoring programs.