How new bank transfer scam protections could help you
Banks must now refund up to £85,000 of losses from authorised push payment fraud
Scam victims have been given new protections under reforms that require banks to refund most account holders if they lose money to fraud.
Previously, it was up to banks if they refunded customers who had been scammed, but in a "world first", they must now repay "authorised push payment" fraud victims up to £85,000, said BBC News.
Authorised push payment scams are when criminals deceive victims into transferring them money via a banking app. The changes, launched on 7 October, introduce "world-leading levels of protection" against this kind of fraud, said the Payment Systems Regulator. Banks also now have "strong incentives" to create better ways of preventing scams in the first place. And they'll be able to "delay and investigate payments" for up to 72 hours if they are suspected to be fraudulent, according to HM Treasury.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
What is authorised push payment fraud?
Authorised push payment fraud is the "most common" type of scam in the UK, said Forbes Advisor. It works by tricking individuals into "sending money under false pretences" from their own account to someone pretending to be an official body such as the bank, police or HMRC. Other common scams are romance scams, where you send money to someone you met online, or pay for goods or services that don't exist. Almost £460 million was lost to authorised push payment fraud in 2023, according to banking trade body UK Finance.
How are fraud protections changing?
Before the new changes, most banks were part of a voluntary scheme called the Contingent Reimbursement Model, where it was up to banks to refund scam victims, and they could refuse if it was "believed that warnings were ignored", said MoneyWeek. But scammers can be "pretty convincing", so the regulator has stepped in to "further protect account holders" and has made it mandatory to reimburse these fraud victims within five days.
The £85,000 limit will cover 99.8% of cases, said the regulator. It had initially proposed a higher £415,000 limit, said MoneySavingExpert, but this was lowered "amid pressure from the financial services industry". The regulator said it "could reduce investment and risked stifling competition and innovation in the market".
Banks can also charge up to a £100 excess for each claim, although not to customers deemed vulnerable.
Will new fraud protections make a difference?
The new rules mean banking customers will be "more protected under consistent minimum standards", said the regulator. Financial brands will also be more incentivised to "develop better systems" to spot and stop fraud, said lawyers Farrer & Co.
But, "sadly", the upper claims limit will leave victims of "high-value scams" unable to reclaim losses, said Which?. Banks can also reject your claim if they can show you have been "grossly negligent", added MoneySavingExpert, but this may only happen in a "small minority of cases".
There are also warnings about banks being able to hold suspicious payments for 72 hours, said property magazine The Negotiator, as this means "large-scale transactions in property purchases could be regularly blocked". Estate agency trade body Propertymark said it will be watching for "unintended consequences" from the anti-fraud measures.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Marc Shoffman is an NCTJ-qualified award-winning freelance journalist, specialising in business, property and personal finance. He has a BA in multimedia journalism from Bournemouth University and a master’s in financial journalism from City University, London. His career began at FT Business trade publication Financial Adviser, during the 2008 banking crash. In 2013, he moved to MailOnline’s personal finance section This is Money, where he covered topics ranging from mortgages and pensions to investments and even a bit of Bitcoin. Since going freelance in 2016, his work has appeared in MoneyWeek, The Times, The Mail on Sunday and on the i news site.
-
Today's political cartoons - January 19, 2025
Cartoons Sunday's cartoons - moving to Canada, billionaire bootlickers, and more
By The Week US Published
-
5 inflammatory cartoons on the L.A. wildfires
Cartoons Artists take on climate change denial, the blame game, and more
By The Week US Published
-
The problems with the current social care system
The Explainer The question of how to pay for adult social care is perhaps the greatest unresolved policy issue of our time
By The Week UK Published
-
Hoping to sell your house in 2025? Here's what to expect.
The Explainer Will the housing market favor buyers or sellers this year?
By Becca Stanek, The Week US Published
-
How to decide on the right student loan repayment plan
The explainer President-elect Donald Trump seems unlikely to approve more student loan forgiveness, so you may want to consider other options
By Becca Stanek, The Week US Published
-
When does a Roth 401(k) make more sense?
The Explainer There are several key differences between a Roth 401(k) and a 401(k) that may make one option more beneficial than the other
By Becca Stanek, The Week US Published
-
Will you owe taxes on your year-end bonus?
The Explainer Since your bonus counts as supplemental wages, it can be subject to different federal withholding rules
By Becca Stanek, The Week US Published
-
PAYE vs. ICR: how these income-driven plans work for student loans
The Explainer As of December 2024, borrowers can once again enroll in Paye as You Earn (PAYE) and Income-Contingent Repayment (ICR)
By Becca Stanek, The Week US Published
-
What are annuities and how do they work?
The explainer They are commonly associated with retirement planning due to their ability to provide reliable payments over time
By Becca Stanek, The Week US Published
-
How much should you spend on holiday gifts?
The Explainer Let your personal budget be your guide
By Becca Stanek, The Week US Published
-
What exactly are tariffs and how do they work?
The explainer Refresh your understanding ahead of Donald Trump's promise to levy heavy tariffs once he's back in office
By Becca Stanek, The Week US Published