Banks’ fraud loss coverage reportedly to drop to £85,000 after industry backlash
The maximum fraud losses banks are obliged to cover is set to drop to £85,000, down from a planned £415,000, according to a report.
Watchdog the Payment Systems Regulator (PSR) is expected to announce the watering down of the reimbursement scheme – set to take effect in October – as reported by the Financial Times (FT).
It comes after government ministers and industry bodies had called on the regulator to lower the limit, with both the Treasury and FCA warning against the higher limit.
Suggestions banks and fintechs would be forced to fully reimburse victims of authorised push payment (APP) fraud up to a limit of £415,000 could do long-lasting damage to the industry were revealed to City PM last month.
The regulation would have taken effect on 7 October and have been split between the firms used to send and receive the payment – amounting to some 1,500 payment companies.
Banking trade body UK Finance reported Brits lost some £459.7m to APP fraud last year, while insiders warned firms may struggle to use claims management systems and be forced to manually report cases, making it harder to hit five-day reimbursement deadlines.
Labour’s City minister Tulip Siddiq was reportedly “very worried” that the October deadline may be too tight, while Chancellor Rachel Reeves is also “concerned”, City PM reported.
An industry source previously speculated that “something will change – maybe a delay, maybe the threshold,” despite the PSR previously standing by its plan.
There were also fears setting the level too high could have resulted in criminals exploiting the system of compensation, risking smaller firms going bust.
A spokesperson for the PSR declined to comment on the FT story.