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Banks’ performance in dealing with APP scam victims revealed by regulator

A regulator has revealed the performance of individual banks in tackling authorised push payment (APP) scams and how they treated those who fell victim in 2022.

To help improve transparency for consumers, the Payment Systems Regulator (PSR) collected data from banks on reimbursement to victims.

Significantly, there are currently inconsistent outcomes for customers who report an APP scam to their bank or building society, the regulator said.

For example, it said some automatically reimburse in full, others may only make a partial reimbursement, leaving victims to bear part of the loss, and others will only accept claims subject to very narrow circumstances.

The PSR said that, by the volume of cases, where there was full reimbursement, TSB fully reimbursed 94% of the APP scam cases reported to it.

It was followed by Nationwide, which fully reimbursed 91% of cases, and Barclays, which fully reimbursed in 79% of cases.

The PSR said 6% of cases reported to Monzo were fully reimbursed, while Danske Bank fully reimbursed 7%.

The PSR warned that TSB was unable to separate out Financial Ombudsman Service (FOS) reimbursements from its data, causing its reimbursement statistic to be overstated, although it said this is not likely to have any material effect on its ranking.

The regulator also looked at which banks and payment firms held accounts that received the highest value of APP fraud per million pounds of transactions.

The top firms in the research with the highest account receiving fraud rate included Metro Bank, Starling, TSB and Monzo.

For every £1 million received into Metro Bank accounts in 2022, £696 of it was APP fraud, the regulator said.

For TSB, for every £1 million received, £605 of it was APP fraud. For Starling it was £307 in every £1 million, and for every £1 million received in a Monzo account, £227 was from an APP fraud.

The PSR said that, by contrast, for every £1 million received by Santander accounts, only £44 was from APP fraud.

Chris Hemsley, managing director of the PSR said of the new data: “This represents a substantial improvement in transparency. This provides better information for customers on how firms handle APP fraud and encourages these firms to take more action to tackle it.

“Our approach is working because we know there is a greater focus across many more firms on preventing fraud. Our commitment to transparency and the forthcoming mandatory rules are key to strengthening efforts to prevent these frauds from happening in the first place.

“Over the coming months, we will be bringing all payment firms into new reimbursement arrangements to give more consistent protection across the board. This is important because we can see from today’s report that this has not always been the case.”

Currently, many banks are signed up to a voluntary reimbursement code, but there have been concerns that it is not always interpreted consistently. Some providers, such as TSB, operate their own guarantees around reimbursement.

Mandatory reimbursement requirements are due to be put in place for victims of APP scams in 2024. The new measures will also see both sending and receiving firms often being held equally liable for reimbursing victims of APP fraud.

The report covered the period January 1 2022 to December 31 2022 and The report focused on Faster Payments because it is the most frequently used way that fraudsters carry out an APP scam, the PSR said.

Although payments resulting from APP fraud represented less than 0.1% of overall Faster Payments volumes in 2022, Faster Payments were used for 98% of APP fraud payments.

Payment firms will be required to publish the information on their websites within 20 days, which will give consumers greater transparency, the regulator said.

It will continue to collect data from payment firms over the next 12 months and will publish a report for 2023 next year.

It is also working with the Financial Conduct Authority (FCA) to identify where action is needed and will set out plans for payment firms to make improvements.

A statement from trade association UK Finance, which represents banks and other financial firms, said: “The financial services sector invests more in countering fraud than anyone else, and is the only sector that reimburses victims – even though the vast majority of authorised fraud originates on other platforms and networks.

“Our latest fraud report shows that the majority of authorised push payment fraud is reimbursed, with over £152 million returned to victims in the first half of this year alone.

“What today’s data from the PSR does not show is where fraud starts. Our data shows that 94% of authorised fraud starts online or over the phone, through social media, fake messages and more.

“But the technology and telecommunications sectors bear no responsibility for reimbursing victims, which means there is little commercial incentive for them to truly tackle the enormous threat that continues to proliferate on their platforms and networks.

“While you can reimburse money, you cannot reimburse the emotional and psychological impact that fraud has on victims. We need these sectors to do more with us to protect consumers by preventing these awful crimes from happening in the first place.”

Sheldon Mills, executive director, consumers and competition at the FCA, said: “Fraud and scams can destroy lives and have a devastating effect on victims. The PSR’s data is an insight into the scale and challenge of tackling APP fraud and we welcome the upcoming rule changes that will see more people get their money back.

“Firms must protect their customers from fraud. We are currently undertaking a review of firms’ anti-fraud measures and we are following up where we have concerns.”

Here are the percentages of APP fraud cases that were fully and partially reimbursed by banks in the PSR’s research (for example, Nationwide fully reimbursed 91% and partially reimbursed 4% of the APP fraud cases in 2022):

1. TSB, 94%, 4%

2. Nationwide, 91%, 4%

3. Barclays, 79%, 13%

4. Santander, 54%, 29%

5. Lloyds, Bank of Scotland and Halifax, 69%, 12%

6. HSBC and First Direct, 66%, 14%

7. NatWest, RBS and Ulster Bank, 70%, 6%

8. The Co-operative Bank, 33%, 40%

9. Metro Bank, 59%, 11%

10. Clydesdale and Virgin Money, 48%, 12%

11. Starling, 44%, 6%

12. Danske Bank, 7%, 10%

13. Monzo, 6%, 8%

14. AIB, 12%