Proactive Investors - New regulations governing the reimbursement for victims of digital fraud begin today, affecting high street banks such as Lloyds Banking Group PLC (LON:LLOY), NatWest Group PLC (LON:NWG), building societies like Nationwide Building Society (LON:NBS) and Coventry Building Socienty, and payment service providers that range from Wise to Stripe to eToro.
Victims can get up to £85,000, potentially with payment being received within five days, under the new rules governed by the UK’s Payment Systems Regulator (PSR) that began today, 7 October 2024.
Previously a voluntary process, recompensation of fraud victims has now become mandatory, for customers of UK licensed banks and payment entities who were tricked into sending money from their accounts to someone as part of a scam.
These scams, where victims pay for goods that don’t exist or never arrive, are known as authorised push payment (APP) scams.
The top level of compensation has been reduced from £415,000, after objections from the banking industry.
Banks will be able to recoup half of the money recompensed from the financial institution used by the fraudster.
Losses from this type of fraud totalled £459.7 million in 2023, according to the industry's trade body UK Finance, across a total of 232,429 APP cases.
For APP frauds last year, £287.3 million of losses was returned to victims, 62% of the total.
Over three-quarters (76%) of APP fraud cases originated from online sources, generally lower-value scams such as purchase scams, accounting for less than a third (30%) of total losses.
Larger frauds tend to be impersonation frauds, with 16% of cases but 43% of total losses.