TSB says fraud refund scheme will exclude a quarter of scam victims

The bank said the regulator should halt a new bank transfer fraud refund mechanism that would allow banks to exclude refunds where payments are for less than £100.

The Government has previously said that the PSR will be able to require banks to reimburse APP (authorised push payment) scam losses.

The move has been supported by consumer organisations.

Rocio Concha, director of policy and advocacy, with the consumer organisation Which said: "Our research has found that even those who believe they are aware of the risk of scams, and take precautions to protect themselves, can still fall victim to scammers, who are constantly sharpening their tactics.

"Lower value losses can still cause financial and emotional distress for victims - including losses under £100. Which? would not support any new reimbursement rules excluding losses under this amount, which for many victims can be a significant amount of money during the cost of living crisis.

"The regulator must ensure fraud victims receive treatment that is fair and consistent and hold banks to account with strong enforcement measures if they are falling short."

Spoofing, where fraudsters impersonate legitimate companies, such as banks, utilities providers or government agencies, is a common tactic used to deceive victims.

Scammers forge the name or number that comes up on an email, phone call or text so it appears to match that of a genuine firm.

Ofcom estimates that 40.8 million UK adults have received a suspicious call or text in the last three months.

Chris Hemsley, managing director of the PSR, previously told MPs during a committee hearing that around 25%, or a quarter, of frauds are below £100, which equates to about 1% of frauds by value.

He said the PSR’s proposals would not stop firms using “sensible discretion”.

It has been proposed that both the sending and receiving banks will bear the responsibility for allowing fraudulent payments, further incentivising banks who have accounts held by fraudsters to act.

TSB has submitted evidence to the PSR’s consultation largely welcoming the proposals, but calling for the £100 threshold and a £35 excess fee to be reversed, to avoid leaving some fraud victims behind.

The PSR has said it wants to see requirements for mandatory reimbursement in place for consumers as soon as possible.

At present, many banks have signed up to a voluntary industry code, however, there have been concerns that it has not been applied consistently and the level of protection people are getting from scams depends on who they bank with.

Companies can sign up to regulator Ofcom’s ‘Do Not Originate’ (DNO) list, a shared resource with telecoms providers to help them identify and block calls from numbers that are most likely to be spoofed.

But a November investigation by the consumer organisation Which found at least six major banks and building societies - including Scottish-based TSB failed to make full use of the DNO list.

To test how effective banks were at protecting their customers, Which? made calls to a test phone, spoofing the prominent numbers of 14 current account providers.

Firms’ numbers were chosen if they were the ones printed on the back of debit cards or listed as fraud helplines on their websites.

At least one phone number from the Edinburgh-based bank as well as HSBC, Lloyds, Santander, Nationwide and Virgin Money was successfully spoofed, leaving customers of those firms potentially at risk.

A previous Which survey among fraud victims found that of those who were initially approached by either phone or text, two-thirds (68%) said the incident involved number spoofing.

TSB later said that all relevant TSB numbers are now on Do Not Originate, It says it has offered a fraud refund guarantee since 2019, while since 2021, Nationwide Building Society has provided a scam checker service.

The TSB fraud guarantee launched in May, 2019,  came with a promise that innocent customers who have been defrauded will automatically be refunded. But there was criticism when it emerged it was only if an incident had happened since April 14.

TSB, which examined its own data, said more than one in 10 (11%) cases under the £100 threshold relate to victims of advanced fee fraud – a category which typically targets the most financially vulnerable, often by persuading victims to pay a fee to access loans that do not exist.

The bank said younger people could also be disproportionately affected by the £100 threshold – as over half (52%) of victims within this category are aged 20 to 40.

Paul Davis, director of fraud prevention, TSB said: “We welcome these moves by government and regulators to increase customer protection from fraud.

“However, many people simply cannot afford losing £100 to fraud – especially in the current economic climate – and deserve to be protected from increasingly complex scams that often take place on social media sites.

“TSB’s fraud refund guarantee has been protecting our customers for nearly four years and currently pays out to 98% of fraud victims, including those with losses under £100.”

A PSR spokesperson said: “We want people to be better protected if they are targeted by a scammer and our recent proposals aim to provide much greater and consistent levels of protection against APP fraud. Our proposals will place strong incentives on banks to do more to detect and prevent APP fraud in the first place.

“Under our plans, banks will be required to reimburse the majority of customers who have fallen victim to APP fraud. This is likely to be a significant increase on current reimbursement rates which are around 56%.

“In line with protections for other payments and financial services, we have consulted on proposals which would see a minimum standard of protection across the board – where banks may put in place a minimum threshold of £100 and an excess of no more than £35.

“However, banks can of course go much further by choosing to pay the whole amount of every claim.”