Complaints related to fraud have reached their highest level since at least early 2018, according to the UK’s financial ombudsman. This surge in complaints is adding pressure on payment firms who are contesting a new mandatory reimbursement scheme.
In the period between April and June, the Financial Ombudsman Service (FOS) received 8,734 complaints about fraud and scams. This figure represents an increase from the 6,094 cases reported during the same period last year and is the highest quarterly reading since the FOS began accurately tracking this data in the first three months of the 2018/19 financial year.
The FOS attributes this increase to several factors including consumers filing multiple claims if more than one firm is involved, a rise in people inadvertently using credit or debit cards to pay fraudsters, and an increase in cases being brought by professional representatives, as reported by City AM.
More than half of the latest complaints were related to customer-approved online bank transfers, also known as authorised push payment (APP) fraud. According to UK Finance, the banking trade body, APP fraud cost consumers £459.7m last year.
This surge in cases is fuelling a dispute between banks, fintechs, and the Payment Systems Regulator (PSR) over incoming rules designed to provide stronger protection to scam victims. New measures set to be implemented will require banks and building societies to reimburse APP fraud victims up to a limit of £415,000 per case from 7 October unless firms can prove that the customer acted with “gross negligence.”
Trade associations are lobbying the regulator for a relaxation of standards, advocating a reduction in reimbursement thresholds and more lenient criteria for claim denial, along with extended timelines to better prepare.
An individual acquainted with the situation disclosed to City AM that, under considerable pressure from industry players and governmental forces, the PSR is planning to adjust its compensation limit to £85,000. The regulatory body refrained from commenting on these speculations.
There are voices within the sector cautioning that the proposed scheme may prove financially unsustainable for smaller businesses, potentially precipitate new types of fraud, and result in customer difficulties.
The Financial Ombudsman Service (FOS) communicated on Wednesday that it believes the measures set forth by the PSR ought to facilitate quicker compensation for those swindled.
Rocio Concha, director of policy and advocacy at consumer group Which?, expressed her concern over the volume of grievances levelled against financial institutions.
“Fraud victims are being badly let down by the current system of reimbursement, with wildly differing outcomes depending on who the victim banks with,” she remarked to City AM, adding, “These figures serve as a reminder that a new mandatory system of reimbursement, which will ensure the vast majority of victims get their money back, cannot come soon enough.”
In response to the statistics, a representative for the PSR stated: “Our new reimbursement requirements will incentivise all payment firms to prevent these scams from happening in the first place, and make sure consumers are protected if they do fall victim.”
Several major banks have committed to a voluntary code offering enhanced consumer protection and promising reimbursement in most cases, with some institutions like TSB providing their own fraud refund guarantees.
The Financial Ombudsman Service (FOS) reported that out of the 4,752 authorised push payment (APP) scam cases it received over three months, more than half (2,734) were not covered by the code.
The FOS has observed a “significant rise” in complaints involving individuals who discover investment opportunities on social media and end up inadvertently transferring money to fraudsters via debit or credit cards. These transactions are not protected by the code or the Payment Systems Regulator’s (PSR) new regulations.
Despite improvements in banks’ fraud detection systems, the FOS noted that the uphold rate for scam complaints is still high at 44 per cent, compared to an average of 37 per cent across all product and complaint issues.
Abby Thomas, the chief executive of the FOS, expressed concern about the increasing levels of complaints, stating it was “disappointing to see complaint levels rising to even higher levels”.
“In recent years, we have investigated thousands of cases, returning more than £150m to those who have fallen victim to these crimes,” she added.
Ben Donaldson, managing director of economic crime at UK Finance, remarked: “The financial services sector invests more in countering fraud than anyone else and is the only sector that reimburses victims.”
He further commented: “Our data shows that over 90 per cent of APP fraud starts online or over the phone, through social media, fake messages and calls. Despite this, these sectors bear no responsibility for reimbursing victims.”
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