Treasury Committee Chair welcomes strengthened proposals for mandatory fraud refunds
7 June 2023
Commenting on new proposals from the Payment Systems Regulator (PSR) for victims of authorised push payment fraud to be reimbursed by their bank, Harriett Baldwin MP, Chair of the Treasury Sub-Committee on Financial Services Regulations, said:
“We’ve heard truly shocking and heart-breaking stories of individuals whose lives have been turned upside down by criminal fraudsters, which is why we’ve been calling for the regulator to be robust in using its powers to mandate banks to reimburse their customers.
“We highlighted a potential conflict of interest with the regulator’s initial proposals, so we are pleased the regulator has addressed this by accepting our recommendation to enforce bank compliance with reimbursement rules. This will result in better outcomes for consumers, faster.
“There are still several steps to go in this process, and the Sub-Committee will continue to hold the regulator’s and the banks’ feet to the fire until the scheme is introduced to ensure fraud victims are properly protected and that no more foot-dragging occurs.”
Earlier this year, the cross-party Sub-Committee of MPs criticised the PSR’s proposals to hand responsibility for implementing mandatory reimbursement to a separate body, Pay.UK, without directing banks to follow reimbursement rules.
The Committee found:
“Pay.UK is not a regulator. It lacks the necessary independence and enforcement powers to be effective in enforcing compliance with APP fraud reimbursement rules.” (para 42)
“We recommend the PSR revise its plans to incorporate its use of directions to payment service providers under section 54 of the Financial Services (Banking Reform) Act 2013. This will give the regulator more control over the process and result in better outcomes for consumers.” (para 45)
“Pay.UK will be required to make the rule changes we set out, and – in a change to our initial proposals – all PSPs will be required to comply with them. Both requirements will be backed by our regulatory oversight and enforcement powers.
“Consistent with the Sub-Committee’s recommendation, this change in our approach further reduces the risk of delay, by the PSR making more use of its powers of direction.”
Fraud is the most common crime in England and Wales, and one of the most reported in Scotland. Authorised push payment fraud, where a scammer tricks someone into sending them a payment, is widespread. According to UK Finance, at least 196,000 consumers lost a total of £583 million to these scams in 2021.
- The Treasury Sub-Committee on Financial Services Regulations scrutinises newly proposed draft financial services regulations.
- The Sub-Committee published its report, Scam reimbursement: pushing for a better solution, in February.
- The Sub-Committee published responses from the PSR, Financial Conduct Authority (FCA), Bank of England and Financial Ombudsman Service (FOS) on scam reimbursement in March.
- Read the PSR’s response to the Sub-Committee, published today.
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