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UK banks are at odds over whether to impose an “excess” fee of up to £100 on customers who fall prey to scams and seek compensation under new fraud regulations set to take effect next Monday.
The forthcoming mandatory reimbursement framework permits banks and payment providers to implement a £100 excess when resolving fraud claims from customers duped into transferring amounts of up to £85,000 to fraudsters through push payment scams. Banks will be obligated to reimburse most fraud victims within just five working days.
Recent industry lobbying resulted in regulators reducing the maximum reimbursement limit to £85,000 from £415,000 per claim.
A segment of the industry views excess charges as a deterrent to the “moral hazard” of customers being complacent about scam efforts or possibly colluding in fraudulent activities.
In contrast, consumer advocates have condemned these charges. Data from UK Finance indicates that 32 percent of push payment fraud cases involve sums of £100 or less. In these instances, customers of banks that implement the excess fee may incur losses, whereas customers of banks that waive this charge will remain protected.
While not all banks and payment providers plan to impose an excess fee, they are required to inform customers in the upcoming days regarding their stance.
TSB, Nationwide, Virgin Money, Clydesdale Bank, Yorkshire Bank, and AIB have all informed the Financial Times that they will not impose any fees on customers who fall victim to scams.
NatWest indicated it may apply a fixed excess of £100 to reimbursements made to customers, stating that this will be “assessed on a case-by-case basis and with regard to the specific circumstances of each customer.”
Metro Bank, along with payment service providers Modulr and Zempler, has confirmed they will enforce the £100 excess charge in its entirety. Under the new regulations, these fees cannot be imposed on vulnerable customers, who are especially at risk due to their individual situations.
Nicola Bannister, customer support director at TSB, noted that one-third of all fraud claims submitted by the bank were for £100 or less, with purchase fraud scams originating from social media contributing significantly to the total.
“£100 can be quite significant for someone,” she remarked, urging other banks to clearly communicate whether they plan to implement these charges.
Additional banks, including Barclays, Lloyds, HSBC, Monzo, Starling, the Co-Operative Bank, and Danske Bank, have stated they are finalizing their stance on excess charges but intend to notify customers regarding updated terms and conditions before the new regulations commence on October 7.
According to UK Finance, more than £459 million was lost to push payment fraud in 2023, marking a 12 percent increase in the volume of cases compared to the previous year. Under the existing voluntary reimbursement framework, banks returned £287 million to fraud victims, resulting in a reimbursement rate of 62 percent.