UK lawmakers says proposals to hand responsibility for scam reimbursement to a body sponsored by the banking industry are “fundamentally flawed”.
Authorised push payment fraud, where a scammer tricks someone into sending them a payment, is widespread. At least 196,000 consumers lost £583 million to these scams in 2021.
The Payment Systems Regulator (PSR) proposes that banks and building societies will be required to fully reimburse victims of authorised push payment scams within two days of the fraud being reported where the loss is over £100.
However, rather than taking control of implementing mandatory reimbursement itself, the PSR is handing responsibility to Pay.UK, which is guaranteed by the financial services industry.
The Committee sees this as an inherent conflict of interest, as Pay.UK will be responsible for ensuring the very banks and building societies that are its own guarantors - some of which are fundamentally opposed to the plans - pay out large sums to reimburse consumers.
This creates an opportunity for the banking industry to slow down the implementation of the reimbursement plans, which have already been "unacceptably delayed" until 2024, say MPs, who are demanding enforcement by the end of the year.
The Committee also outlines that Pay.UK lacks effective tools to ensure the financial services industry is complying with the rules, as it has no regulatory or enforcement powers. The MPs call for the PSR to revise its plans and take back control of the reimbursement process.
Treasury Committee Chair, Harriett Baldwin MP, says: "Putting an industry body in charge of reimbursing scam victims is like asking a fox to guard the henhouse. The regulator needs to take back control of the reimbursement process, rather than leave it in the hands of an industry body which is inherently conflicted.”
Separately, the Treasury Sub-Committee on Financial Services Regulations has raised concerns about types of fraud which are not covered by the PSR’s proposals. In a letter to the Bank of England, the MPs question why high-value transactions made through Chaps such as house purchases, are not included. While these scams account for 0.2 per cent of all fraud, they amount to four per cent of fraud by value.
In a letter to the Financial Conduct Authority (FCA), the Sub-Committee asks whether transactions within the same bank will miss out on mandatory reimbursement protection.
The PSR has already come under attack for allowing banks to adopt a £100 threshold for reimbursing victims, a measure which could exclude up to a quarter of scam victims. MPs have also questioned this decision in correspondence with the PSR.
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- Source: https://www.finextra.com/newsarticle/41743/app-scam-reimbusement-plans-are-fundamentally-flawed-say-mps?utm_medium=rssfinextra&utm_source=finextrafeed
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