UK banks divided over charging scam victims £100 for reimbursement

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UK banks are divided over whether to hit customers with an “excess” charge of up to £100 if they fall victim to scammers and claim for compensation under fraud rules that will apply from next Monday.

The new mandatory reimbursement system gives banks and payment providers the option of applying a £100 excess when settling fraud claims made by customers who have been tricked into transferring sums of up to £85,000 to criminals via push payment scams. Banks will have to reimburse the majority of fraud victims within just five working days.

Last-minute lobbying efforts by the industry led regulators to lower the maximum reimbursement threshold to £85,000 from £415,000 a claim.

Many in the industry view excess charges as a deterrent against the “moral hazard” of customers dropping their guard against scam attempts, or even being tempted to collude in fraudulent behaviour.

However, consumer groups have decried the charges. Industry data from UK Finance shows that 32 per cent of push payment fraud cases are for amounts of £100 or less. In such cases, customers of banks who have chosen to apply the excess charge stand to be left out of pocket, but customers of banks who waive the charges will still be protected.

Not all banks and payment providers intend to charge an excess, but have to contact customers in coming days to set out their position.

TSB, Nationwide, Virgin Money, Clydesdale Bank, Yorkshire Bank and AIB have all told the Financial Times they will not be passing on any charges to customers who fall victim to scams.

NatWest said it may apply a fixed excess of £100 to the total amount reimbursed to customers. The bank said: “This [will be] assessed on a case-by-case basis and with regard to the specific circumstances of each customer.”

Metro Bank and payment service providers Modulr and Zempler all confirmed they would be charging the £100 excess in full. Under the new rules these charges cannot be passed on to vulnerable customers, who, due to their personal circumstances, are especially susceptible to harm.

Nicola Bannister, customer support director at TSB, said one-third of all fraud claims the bank received were for £100 or less, with purchase fraud scams that originate on social media making up a large part of the total.

“£100 can be a lot of money to somebody,” she said, adding that other banks should make it very clear whether or not they intended to apply the charges.

Other banks including Barclays, Lloyds, HSBC, Monzo, Starling, the Co-Operative Bank and Danske Bank said they had yet to finalise their position on excess charges, but intended to contact customers with updated terms and conditions before the new rules took effect on October 7.

More than £459mn was lost to push payment fraud in 2023, according to UK Finance, which logged a 12 per cent rise in the volume of cases year on year. Under the current voluntary system of reimbursement, banks returned £287mn of money lost to victims, a reimbursement rate of 62 per cent.