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New bank transfer fraud refund scheme sees 86% of losses refunded
Your chances of getting money back after a bank transfer scam have improved thanks to new world-first fraud protections that Which? campaigned for
Following the introduction of a groundbreaking fraud refund scheme, the payments regulator has revealed that 86% of losses were returned to victims in the first three months.
Imagine being tricked into approving a bank transfer to a fraudster, only to discover you have no legal protection against this type of loss. This was the reality for too many scam victims, for too long, but it all changed on 7 October 2024.
Eight years after Which? issued a super-complaint demanding banks do more to shield consumers from losses to authorised push payment (APP) fraud, the Payment Systems Regulator (PSR) introduced new rules requiring firms to reimburse victims within five business days in all but exceptional cases.
Here, we look at a snapshot of the first three months of the scheme and explain how the new rules are encouraging firms to work together to identify and prevent fraud.
Reimbursement rates have improved
Concerns about the introduction of an industry-wide scheme have proven to be unfounded.
Some predicted a sharp rise in the number of claims and said that customers would become less cautious or even reckless, but the volume of claims (around 46,000) is lower than an equivalent period in 2023 (when an average three-month period equated to 56,000 cases). And only 2% of total claims were rejected because the 'consumer standard of caution' was not met (more on this later).
Although volumes are expected to rise in the short to medium term as victims become more aware of the policy, there is no evidence of a surge in complaints reaching banks, the Financial Ombudsman Service (FOS) or the Financial Conduct Authority (FCA).
The PSR said 86% of money lost to APP scams, totalling around £27m, was returned to victims, and 14% of claims were made by consumers with a vulnerability, equating to £7m. While not directly comparable, due to methodology changes, reimbursement in 2023 was only 68%.
Sending and receiving firms appear to be working well together to respond to claims quickly, as 84% of claims were closed within five business days.
Firms are working better, together
Before this policy came into effect, some bank customers had a much better chance of being reimbursed if they lost money to APP fraud than others.
This is because there was only a voluntary Contingent Reimbursement Model Code (CRM code) in place, which was launched in 2019 and signed by eight banking groups: Barclays, HSBC, Lloyds, Metro Bank, Nationwide, NatWest, Santander and Starling Bank (the Co-operative Bank and Virgin Money joined later).
These firms committed to protect their customers by detecting, preventing and ultimately refunding APP fraud losses. The largest banks also began rolling out Confirmation of Payee, a name-checking service that helps to prevent misdirected and scam payments. Yet neither intervention stemmed the tide of fraud.
Which? continued fighting for fairer and more consistent redress until the PSR took decisive action, proposing mandatory reimbursement for victims.
The new scheme applies to any provider using Faster Payments (more than 1,000 firms) and requires both parties in the payment journey to share the cost of reimbursing victims, which means both sending and receiving firms are highly motivated to work together.
The PSR said that this has started well. Most claims (86%) have been reported by the sending firm to the receiving firm within two business hours of the consumer raising the claim, though the information shared is sometimes limited and improvements are needed to prevent the fraud in the first place.
An independent review of the policy's effectiveness will begin in October 2025, enabling the PSR 'to take stock of where we are after the policy has been in place for a year'.
The data covers UK payments made over the Faster Payments system from the start of the reimbursement policy (7 October 2024) up until the end of 2024.
- Take action: a step-by-step guide on what to do if you're a victim of APP fraud
'Which? campaigned for years to make reimbursement mandatory'
Rocio Concha, Which? director of policy and advocacy, said: 'Which? campaigned for years to make reimbursement mandatory, so it's encouraging to see that the new rules appear to be having a positive impact, with more APP scam victims getting their money back and a more consistent approach from banks and payment providers.
'These figures dispel nonsense industry claims that fair treatment and mandatory reimbursement for scam victims would lead to a glut of cases of ordinary consumers teaming up with criminals to make bogus claims.
'It’s now time for the government and regulators to get tough with payment firms that don’t take scam security seriously and produce a fraud strategy that tackles the other weak links in the fraud chain – like social media firms, search engines and telecoms firms that make it too easy for fraudsters to reach victims.'
What the new rules mean for you
You should be reimbursed within five business days of reporting APP fraud to your payment provider – down from 15 days under the CRM Code.
The amount is capped at £85,000 per claim, and the sending and receiving firms will equally split this cost.
Firms can also choose to ask customers (excluding those considered vulnerable) to pay a £100 ‘excess’. The likes of Nationwide, TSB and Virgin Money have already said they won't apply this, while Starling has said it may apply a £50 excess in some cases.
It's important to note that both the voluntary Code and the mandatory scheme apply to UK bank transfers only, not international transfers or other payment systems such as debit or credit payments.
Consumer standard of caution
Your claim could be rejected if your bank has evidence that you were particularly careless or complicit in the fraud.
Under the voluntary scheme, customers were expected to have a ‘reasonable basis’ for believing they were paying a legitimate person, and to pay attention to targeted fraud warnings from their banks.
The new scheme brings its own expectations, known as the consumer standard of caution. This consists of four key requirements, but your bank can’t simply reject your claim if you fail to meet one of these standards. The failure must be because of gross negligence, and the burden of proof falls on firms.
- Have regard to interventions You should heed fraud warnings and specific, directed interventions by your provider or authorities such as the police.
- Report fraud promptly You should submit your fraud claim no more than 13 months after the final payment to the fraudster.
- Share relevant information You should respond to any reasonable and proportionate requests for information by your provider when it assesses your claim.
- Report fraud to the police Your provider can request that you report the details of an APP scam to the police or other authority, or will ask for your consent to report to the police on your behalf.
If you were vulnerable to a scam because your personal circumstances made you especially susceptible to harm, you shouldn’t be subject to the consumer standard of caution or the £100 claims excess. The PSR says it expects only a small minority of claims to be refused, so stand your ground if this happens.
