Yahoo Finance New fraud victim reimbursement scheme 'flawed', MPs warn
The new proposals to reimburse fraud victims are “fundamentally flawed” as a body sponsored by the banking industry would be in charge of making sure banks issue refunds.
The Treasury committee has criticised the “painfully slow” implementation of mandatory reimbursement for fraud victims, and is against new proposals by the regulator which would hand the refund process to an industry body.
The Payment Systems Regulator (PSR) is proposing that banks and building fully reimburse victims of authorised push payment scams within two days of the fraud being reported where the loss is over £100.
However, the MPs note, rather than taking control of implementing mandatory reimbursement itself, the PSR is proposing handing responsibility to a separate body – Pay.UK – which is guaranteed by the financial services industry.
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The committee highlighted the conflict of interest, as Pay.UK will be responsible for ensuring the very banks and building societies that are its own guarantors – some of which are fundamentally opposed to the plans – pay out large sums to reimburse consumers.
“This creates an opportunity for the banking industry to slow down the implementation of the reimbursement plans, which have already been unacceptably delayed until 2024. The MPs state that mandatory reimbursement must be fully implemented by the end of this year,” the committee said.
Fraud is the most common crime in England and Wales, and one of the most reported in Scotland. Authorised push payment fraud, where a scammer tricks someone into sending them a payment, is widespread. At least 196,000 consumers lost £583m to these scams in 2021.
Harriett Baldwin, chair of the Treasury committee, said: “Victims of fraud have been waiting far too long for a fair and functional scam reimbursement scheme. However, while these new proposals are a step in the right direction, the way the regulator plans to implement them is fundamentally flawed. Putting an industry body in charge of reimbursing scam victims is like asking a fox to guard the henhouse.
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“The regulator needs to take back control of the reimbursement process, rather than leave it in the hands of an industry body which is inherently conflicted.”
Rocio Concha, Which? director of policy and advocacy, added: "The Treasury select committee is right to say that victims of app fraud deserve better treatment than the reimbursement lottery they currently face and that plans for mandatory reimbursement need strong regulation.
“The government should heed the committee’s warnings and amend the Financial Services & Markets Bill to make the Payment Systems Regulator responsible for introducing a reimbursement obligation on payments firms and enforcing it, so that scam victims have a reimbursement scheme they can rely on."
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