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According to the Treasury Committee, proposals to reimburse victims of wire transfer scams are half-baked in their current form and require further action. New financial regulations being considered by the Payment Systems Regulator (PSR) will require banks and building societies to provide full refunds to victims of Authorized Push Payment (APP) scams, where the loss exceeds £100. At least 196,000 people collectively lost £583m to app scams in 2021, according to trade association UK Finance.
Last month the Treasury Subcommittee on Financial Services Regulation, which reviews regulatory proposals, questioned why fraud under £100 would not be reimbursed.
Fraud is on the rise and our constituents are being robbed. Regulators need to strap on their skids and quickly sort through all these exclusions and criteria.
The Payment Systems Regulator (PSR) said in correspondence published on Saturday that around a quarter (24%) of APP scams involved transactions under £100, representing 1% of cases.
These figures are drawn from analysis of figures provided by eight members of UK Finance.
The regulator has indicated that it is aligning with the minimum level of reimbursement for credit card fraud, the committee said.
The committee also asked what actions would be considered 'gross negligence', meaning that clients would not be reimbursed in certain circumstances.
The regulator said it would work with the Financial Ombudsman Service (FOS) to monitor how companies apply gross negligence.
The committee is concerned that this will further delay scam victims from getting their money back.
Commenting on the correspondence, Treasury Committee Chair Harriett Baldwin said: “Fraud is on the rise and our constituents are being robbed.
“Regulators need to get on their skids and quickly review all these exclusions and criteria.
"Our committee will keep up the pressure so that the implementation is not delayed or half done."
Separately, MPs also asked the Financial Conduct Authority (FCA) whether fraudulent transactions within the same bank would not qualify for mandatory refund protection.
In response, the regulator agreed in principle that these scams should be reimbursed, but noted that it currently does not have the regulatory powers to enforce this.
The FCA said it was considering the next steps, including whether a legislative change might be necessary.
The Financial Services and Markets Bill pending in Parliament will require the PSR to set up a mandatory PPP Fraud Refund system on the fastest payment system.
MEPs also want to understand what similar steps are being taken in the Chaps high-value payment system, which can be used for transactions such as buying a house or car.
The committee asked the Bank of England, which is the operator of Chaps, why transactions made through Chaps are not included in redemption proposals.
The Bank said it was working closely with regulators to ensure planning around PPP scam refund intervention is effectively aligned and will write to the committee again in the coming weeks with a more comprehensive update.
The PSR said in a statement: “We welcome the Treasury Committee's continued interest in this important issue.
“We want people to be better protected if they are targeted by a scammer and our recent proposals aim to provide much higher and consistent levels of protection against app fraud.
"Our proposals will provide a strong incentive for banks to do more to detect and prevent PPP fraud in the first place. Overall, the changes we are proposing and those we have already made represent a significant step forward in the level of protection and support that people will receive.
“Under our proposals, banks must reimburse most customers who have been victims of APP fraud. This will be a significant increase from current reimbursement rates, which are around 56%.
"Any exception to reimbursement, including gross negligence, is a very high bar that we believe will only apply in a small minority of cases and never when the victim is a vulnerable consumer."
PSR said it received a "wide range of views" on its query, which it is considering.
He said: "We will define our final position in May 2023, which will include our approach to ensuring there is a consistent understanding of all exceptions."
PSR said that all feedback received will be carefully considered before making a final decision on the best course of action "to ensure that people are properly protected against these devastating scams."
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