Banks to be forced to refund some scam victims from next year as reimbursement rules confirmed – here's what you need to know
Banks will be required to refund most victims of bank transfer scams – known as "authorised push payment (APP)" fraud – from 7 October 2024, under new rules confirmed today (Tuesday 19 December). But you'll still need to be cautious when making a payment, as banks will be able to refuse refunds where you haven't been "sufficiently careful" – and they can charge an excess on claims.
APP scams happen when you get tricked into making a bank transfer to the account of a fraudster. This can happen in lots of different ways – for example, a criminal posing as someone from your bank and asking you to move money to a 'safe account' (which they control), or making a payment for goods online that turn out not to exist.
Currently, banks do not have to refund victims of APP scams – though some do, under a voluntary code of practice which came into force in 2019. Yet despite this, only 64% of the money lost to APP scams was returned to victims in the first half of 2023, according to the latest figures from industry trade body UK Finance.
However, from 7 October 2024, new reimbursement rules will come into force, which will make it mandatory for banks to refund most APP scam victims – we explain how these rules will work below. For more help and guidance on protecting yourself from scams, see our 30+ ways to stop scams.
How the new reimbursement rules will work once they come into effect
Here are the key need-to-knows about the Payment Systems Regulator's new consumer protection rules, which apply to all 'payment service providers', which includes banks, building societies, prepaid card providers and other banking firms operating in the UK:
- After you notify your bank about the scam, it will normally have to refund you within five working days. However, depending on the complexity of the case, if your bank needs extra time to gather additional evidence from you, or make enquiries with the bank on the other end, it will have up to 35 working days instead.
- Banks will have the option to charge an excess of up to £100 on each claim. This means they can choose NOT to refund an amount up to the first £100 lost (except if you're vulnerable – more on this below). As the rules have only just been confirmed, we don't yet know what each bank's excess will be.
It's worth noting that in our responses to the regulator's consultations on these new rules, MoneySavingExpert.com and other consumer organisations argued strongly against the introduction of a fixed excess amount. For many, £100 is not a trivial amount to lose, and we are worried that having this limit in place could lead to scammers evolving their tactics to defraud people via smaller individual payments of less than £100 in the hope that victims won't report it as they won't get it back.
However, in its final decision, the regulator stated that the excess "will encourage customers to remain vigilant when making a payment and therefore mitigate the risk of moral hazard" (whereby people are less cautious because they know they're going to be reimbursed).
- The maximum refund amount is set to be £415,000 per claim. This is in line with the existing maximum amount that the Financial Ombudsman Service, the independent complaints arbiter, can award consumers when it resolves individual complaints. However, the regulator noted that setting this level involved "difficult trade-offs", and said it may look to change it if "compelling evidence" emerges between now and October 2024 (when the rules come into effect).
- You WON'T be eligible for a refund if your bank decides you were "grossly negligent". According to the regulator, this is a "very high bar" and involves acting with a "significant degree of carelessness". So you'll still need to take care when making payments. In particular, you'll need to:
- Pay attention to any warnings your bank gives you;
- Let your bank know as soon as possible if you suspect you've been scammed;
- Share information with your bank to help it assess your claim; and
- Consent to fraud details being reported to the police.
If you don't, and your bank decides you were negligent, it won't be required to refund you. However, these requirements don't apply to "vulnerable" customers – more on this below.
- Vulnerable customers will get extra protections. This is defined as "someone who, due to their personal circumstances, is especially susceptible to harm – particularly when a firm is not acting with appropriate levels of care". Banks will have to assess this on a case-by-case basis, taking into account all the facts around any claim.
If you're vulnerable, you'll never be charged an excess on your claim and you won't be expected to meet the same standards of carefulness as those who aren't vulnerable.
If you think you've been scammed, here's what to do
Take the following steps:
- If you've already responded to a scam, end all communication immediately.
- Call your bank directly and cancel any recurring payments – or, for speed and ease, you can call the 159 hotline.
- Report the scam to the police through Action Fraud on 0300 123 2040, or report a scam anonymously on the Action Fraud website. If you're in Scotland, report a scam through Advice Direct Scotland on 0808 164 6000 or on the Advice Direct Scotland website. You can also report scams to Police Scotland on 101.
- If you need more help, contact the helpline run by charity Citizens Advice on 0808 223 1133 or visit its website.