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British banks are divided over whether to impose a ‘deductible’ of up to £100 on their customers if they fall victim to scammers and claim compensation under fraud rules that apply from next Monday.
The new mandatory refund system gives banks and payment providers the option to apply a £100 excess when dealing with fraud claims from customers tricked into transferring amounts of up to £85,000 to criminals via push payment scams. Banks will have to reimburse the majority of fraud victims within just five working days.
Last-minute industry lobbying efforts have led to regulators reducing the maximum compensation threshold from £415,000 per claim to £85,000.
Many in the industry see excessive fees as a deterrent to the “moral hazard” of customers losing their guard against scam attempts, or even being tempted to participate in fraudulent behavior.
However, consumer groups have rejected the allegations. Industry data from UK Finance shows that 32 percent of push payment fraud cases involve amounts of £100 or less. In such cases, customers of banks who have chosen to charge the additional fee will be disregarded, but customers of banks who waive the fee will still be protected.
Not all banks and payment providers plan to charge a deductible, but should contact customers in the coming days to explain their position.
TSB, Nationwide, Virgin Money, Clydesdale Bank, Yorkshire Bank and AIB have all told the Financial Times they will not pass on costs to customers who fall victim to scams.
NatWest said it may apply a flat excess of £100 to the total amount refunded to customers. The bank said: “This [will be] on a case-by-case basis and taking into account the specific circumstances of each customer.”
Metro Bank and payment service providers Modulr and Zempler all confirmed they would charge the £100 excess in full. Under the new rules, these costs cannot be passed on to vulnerable customers, who are extra vulnerable to damage due to their personal circumstances.
Nicola Bannister, customer support director at TSB, said a third of all fraud claims the bank received were for £100 or less, with purchase fraud originating from social media making up a large proportion of the total.
“£100 can be a lot of money for someone,” she said, adding that other banks should make it very clear whether or not they intended to charge the fee.
Other banks, including Barclays, Lloyds, HSBC, Monzo, Starling, the Co-Operative Bank and Danske Bank, said they had yet to finalize their position on excess charges but planned to contact customers with updated terms and conditions before the new rules came into force in October. 7.
More than £459 million was lost due to payment fraud in 2023, according to UK Finance, which recorded a 12 percent increase in cases year on year. Under the current voluntary repayment system, banks returned £287 million of lost money to victims, a refund rate of 62 percent.