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Regulator to force UK banks to offer scam victims compensation

The UK’s regulator for payment services is to gain the power to force banks to offer compensation to blameless victims of “push payment” scams, highlighting “disparities” in the current voluntary approach.

The proposed measure was announced on Tuesday as part of the financial services and markets bill, alongside a commitment to ensuring continued access to cash withdrawal and deposits.

“Scam victims currently face a reimbursement lottery depending on who they bank with, so the regulator must now be ready to ensure firms treat their customers consistently and fairly, with tough enforcement for those that break the rules,” said Rocio Concha, director of policy and advocacy at consumer group Which?

The government pledged in November to strengthen the powers of the Payment Systems Regulator (PSR), which sets rules for banks and other payment service providers, after a surge of scams during the pandemic.

Most high street banks are currently signatories to a voluntary code set up in May 2019. While this improved compensation levels for victims, the government said that the way in which it was applied was “inconsistent”, with varying levels of compensation among banks endorsing the code.

TSB, for example, has offered defrauded customers a guaranteed refund since April 2019.

The government said the financial services and markets bill would clarify the PSR’s powers to require banks, when using certain payment systems, to reimburse victims of authorised push payment (APP) fraud, where fraudsters trick them into sending money to an account which they control. In the first half of 2021, more than £355mn was lost to APP fraud.

The bill also aims to improve the competitiveness of the UK’s financial sector post-Brexit, including reforming capital markets to drive greater investment.

As digital payments have become commonplace and banks have closed branches, it set out a commitment to ensure the long-term future of the country’s cash infrastructure.

“Access to cash for everyone, where they need it, when they need it, is critical for communities,” said Duncan Cockburn, chief executive of OneBanks, an open banking fintech which runs shared branch kiosks.

The pandemic accelerated a long-term decline in the number of bank branches. Almost 200 closures have been announced this year, out of a remaining network of under 7,000.

Cash remains a vital means of transacting, particularly in rural areas and among communities with higher levels of deprivation. Around one in five people in the UK said they would struggle to cope in a cashless society, according to a recent report by ATM network operator Link and the Royal Society of Arts.

The Post Office and major UK lenders in December announced a new initiative to safeguard cash access through measures including shared bank hubs.

Natalie Ceeney, chair of the Cash Action Group, which led trials of bank hubs in 2021, welcomed the announcement. “With this legislation, we can shift the conversation from whether we can protect cash to how we can best meet the needs of those who need it.”

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