Complaints related to fraud have reached their highest level since early 2018, according to the UK’s Financial Ombudsman Service (FOS), amid growing pressure on payment firms due to new reimbursement rules.
From April to June, the Financial Ombudsman Service (FOS) received 8,734 complaints about fraud and scams. This figure marks a significant increase from the 6,094 cases reported during the same period last year, representing the highest quarterly reading since the FOS began accurately tracking this data in the 2018/19 financial year.
Several factors contribute to this increase, including consumers filing multiple claims if more than one firm is involved, a rise in people inadvertently using credit or debit cards to pay fraudsters, and an increase in cases brought by professional representatives. More than half of the complaints were related to customer-approved online bank transfers, known as authorised push payment (APP) fraud. According to UK Finance, APP fraud cost consumers £459.7 million last year.
This rise in cases has intensified the dispute between banks, fintechs, and the Payment Systems Regulator (PSR) over impending rules designed to offer stronger protection to scam victims. New measures, set to be implemented on 7 October, will require banks and building societies to reimburse APP fraud victims up to a limit of £415,000 per case, unless the firms can prove that the customer acted with ‘gross negligence.’ Trade associations are urging the regulator to relax standards, advocating for a reduction in reimbursement thresholds and more lenient denial criteria, along with extended timelines for better preparation.
An individual familiar with the situation disclosed that, under considerable pressure from industry players and governmental forces, the PSR plans to adjust its compensation limit to £85,000. The regulatory body has refrained from commenting on these speculations. Industry insiders warn that the proposed scheme may prove financially unsustainable for smaller businesses, potentially trigger new types of fraud, and result in customer difficulties.
The Financial Ombudsman Service (FOS) stated on Wednesday that it believes the measures proposed by the PSR should facilitate quicker compensation for those defrauded. Rocio Concha, director of policy and advocacy at consumer group Which?, expressed concern over the volume of grievances against financial institutions. ‘Fraud victims are being badly let down by the current system of reimbursement, with wildly differing outcomes depending on who the victim banks with,’ she remarked, adding, ‘These figures serve as a reminder that a new mandatory system of reimbursement, which will ensure the vast majority of victims get their money back, cannot come soon enough.’
In response to the statistics, a representative for the PSR stated: ‘Our new reimbursement requirements will incentivise all payment firms to prevent these scams from happening in the first place, and make sure consumers are protected if they do fall victim.’ Several major banks have committed to a voluntary code offering enhanced consumer protection and promising reimbursement in most cases, with some institutions providing their own fraud refund guarantees.
The Financial Ombudsman Service (FOS) reported that out of the 4,752 authorised push payment (APP) scam cases it received over three months, more than half (2,734) were not covered by the code. The FOS has observed a ‘significant rise’ in complaints involving individuals who discover investment opportunities on social media and end up inadvertently transferring money to fraudsters via debit or credit cards. These transactions are not protected by the code or the Payment Systems Regulator’s (PSR) new regulations. Despite improvements in banks’ fraud detection systems, the FOS noted that the uphold rate for scam complaints remains high at 44 per cent, compared to an average of 37 per cent across all product and complaint issues.
Abby Thomas, the chief executive of the FOS, expressed concern about the rising levels of complaints, stating it was ‘disappointing to see complaint levels rising to even higher levels.’ ‘In recent years, we have investigated thousands of cases, returning more than £150 million to those who have fallen victim to these crimes,’ she added.
Ben Donaldson, managing director of economic crime at UK Finance, commented: ‘The financial services sector invests more in countering fraud than anyone else and is the only sector that reimburses victims.’ He further remarked: ‘Our data shows that over 90 per cent of APP fraud starts online or over the phone, through social media, fake messages and calls. Despite this, these sectors bear no responsibility for reimbursing victims.’
The increase in fraud complaints underscores the urgency for new reimbursement rules to protect consumers. While the Financial Ombudsman Service supports these measures, the financial services sector remains divided on their implementation and potential impact.