Upcoming changes in reimbursement rules leave a third of fraud cases uncovered.
- The new £100 excess and £85,000 cap could influence fraudster strategies.
- Low-value fraud cases may see reduced attention from payment providers.
- Concerns arise about the potential psychological impact on scam victims.
- Call for social media firms to shoulder responsibility for platform-originated scams.
The new reimbursement regulations, set to commence next week, are stirring controversy as they exclude approximately one-third of payment fraud cases from coverage. This shift raises significant concerns regarding its implications on fraudsters’ and fraud detection specialists’ strategies.
These regulations, brought forth by the Payment Services Regulator (PSR), introduce a £100 excess on fraud claims alongside a cap of £85,000 on reimbursements. This means claims falling below £100 will not qualify for reimbursement, and those above will have the first £100 deducted. For instance, a fraud claim of £110 will yield a mere £10 reimbursement, whereas a £500,000 claim will only return £85,000.
The PSR’s data highlights that scams valued under £100 constitute 32% of all Authorised Push Payment (APP) scams. Meanwhile, scams exceeding the £85,000 mark are quite rare, with only one in 500 cases reaching such amounts. These statistics underscore the potential shift in fraudulent activities around the £100 threshold.
The regulator argues that the £100 limit minimises consumer harm and encourages caution among payment service providers (PSPs). Nevertheless, there is an acknowledgment that this approach might lead to more frauds skirting the £100 mark, with reduced attention from PSPs for frauds beneath this threshold.
The PSR has cautioned about the possibility that a fixed claim excess might divert PSP efforts mainly towards high-value fraud detection. It remains concerned that this could weaken the drive to combat lower-value fraud, potentially causing such fraud to proliferate just below the £100 excess level.
In instances where multiple transactions by a single fraudster accumulate to more than £100, claims may still be validated under the new rules. Initially, the PSR had proposed capping reimbursement at £415,000 but scaled back this amount, drawing criticism from consumer groups worried about the impact on victims of high-value scams.
Rocio Concha of Which? highlighted that lowering the reimbursement cap undermines the motivation for banks and payment firms to earnestly pursue fraud prevention. She criticised the regulator for sidelining scam victims, warning of possible adverse financial and psychological consequences.
Additionally, there are growing calls for social media companies to be held accountable for scams perpetrated via their platforms. Recently, Revolut suggested that these entities should compensate victims when such incidents occur.
The new reimbursement rules risk shifting focus away from low-value fraud cases, potentially impacting victims and encouraging strategic fraud behaviour.
