Warning as bank customers could face £100 charge if scammed from October 7

Some banks are considering imposing a £100 charge on customers who are reimbursed for fraud under the new compensation scheme that comes into force next month

The compensation landscape for bank fraud victims in the UK is set to change with a new scheme that may see some banks implement an excess charge of £100 to those affected. The measure, which is part of the new rules, diverges among financial institutions; some have declined the notion, while others remain on the fence.

The policy emerges amidst debate over an already contentious issue: financial firms managed to push for a reduction in the maximum compensation payout from the proposed £415,000 down to £85,000. This upcoming system is tasked with offering a safety net for the tens of thousands swindled annually by scammers posing as credible organisations, from tax authorities to legal professionals and even the police.

With about 200,000 UK residents falling victim to Authorised Push Payment fraud each year and 2023 witnessing nearly £460 million in losses, the effectiveness of this safeguard is critical. However, imposing a £100 excess could result in zero recompense for losses under that amount, effectively disabling the scheme for many.

Liz Edwards of Finder weighed in, stating: "Based on 2023 figures, more than 58,000 cases would have resulted in no refund if all companies had applied the excess. £100 is a lot of money to many people, and banks need to be clear with customers where they stand."

Her comments underscore the concern that such a fee, though intended as a deterrent against complacency, could disproportionately affect those least able to bear it. Meanwhile, UK Finance disclosed that 32 percent of reported push payment fraud incidents ensnare amounts of £100 or less, accentuating the potential downside of such an excess fee, reports the Manchester Evening News.

As policies vary across the sector, banks and payment providers are expected to clarify their positions to their customers shortly.

TSB, Nationwide, Virgin Money, Clydesdale Bank, Yorkshire Bank, and AIB have all informed the Financial Times of their decision not to impose any charges on customers who fall victim to scammers. In contrast, NatWest is contemplating a fixed £100 excess for reimbursement to customers but clarified: "This [will be] assessed on a case-by-case basis and with regard to the specific circumstances of each customer."

Meanwhile, Metro Bank, along with payment service providers Modulr and Zempler, are set to enforce the full £100 excess charge in accordance with new rules which stipulate that these costs should not be levied on vulnerable individuals at an increased risk of harm due to personal situations.

Nicola Bannister of TSB, serving as the bank's customer support director, stated that around one-third of the fraud claims managed by their bank involve amounts of £100 or less, with many connected to purchase scams stemming from social media sites. She highlighted the significance of even small amounts, noting "£100 can be a lot of money to somebody," and called upon other banks to clearly communicate whether they will apply excess charges or not.

A group of various financial institutions including Barclays, Lloyds, HSBC, Monzo, Starling, the Co-Operative Bank, and Danske Bank have not yet disclosed their stance on excess charges. Nevertheless, they intend to update their customers with new terms ahead of the introduction of the forthcoming regulations on October 7.

UK Finance has noted a 12 percent surge in the number of push payment fraud cases year on year. With the current voluntary reimbursement scheme, banks have refunded victims to the tune of £287mn, which translates to a reimbursement rate of 62 percent.