UK Banks Struggle With ‘Ambiguous’ Fraud Reimbursement Rules

Banks, FinTechs and payments companies in the United Kingdom are reportedly struggling with the country’s new fraud rules.

The entities have until Oct. 7 to comply with new regulations requiring them to reimburse victims of payments fraud, Bloomberg reported (Aug. 21). However, many companies aren’t ready for an important system undergirding the settlement infrastructure.

Some industry players haven’t been granted enough time to adjust, while many are frustrated with the refund policy, per the report.

The “entire process has been sclerotic and ambiguous,” ClearBank CEO Charles McManus said, according to the report.

The U.K.’s Payment Systems Regulator (PSR) does not agree.

“We have extensively consulted on these measures for over two years and continue to engage closely with industry to ensure timely and effective implementation,” said Kate Fitzgerald, head of policy at PSR, per the report.

She added in the long term, the PSR wants to see companies switch over to the new arrangement, following a Tuesday (Aug. 20) registration deadline.

Under the new regime, the institutions that send and receive the fraudulent payment will be responsible for reimbursement, with the ceiling for refunds set at 415,000 pounds (about $541,000). Banks and payments companies will need to show gross negligence on the customer to have a claim rejected, the report said.

The payments industry in the U.K. tried in June to get the PSR to hold off on imposing the new rules, an idea the regulator dismissed.

The type of fraud that the new measure aims to prevent — authorized push payments (APP) fraud — remains a problem in the U.K. APP fraud involves a scammer tricking a person into sending a payment to an account outside of their control.

APP fraud reached nearly 341 million pounds (about $445 million) last year, a 12% decline from the previous year. However, the volume of fraud cases rose by 12%, from 224,603 in 2022 to 252,636 in 2023.

“We can see some positive changes with more victims being reimbursed than in 2022,” David Geale, the PSR’s managing director, said at the time. “But there is still more to do — particularly for some smaller firms which have much higher rates of receiving fraud than larger firms.”