Payments regulator sets out vision for industry-wide approach to protect consumers

Oliver Gill
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Regulators want the banking sector to up its game (Source: Getty)

Financial regulators have promised to stamp out payment scams which have cost Britons hundreds of millions of pounds.

The Payment Systems Regulator (PSR), a special branch of the Financial Conduct Authority that focuses on banking payments, said today the financial services sector needs to do more to protect consumers.

"In a short space of time we have built a clearer picture of the problems we are facing, and it is evident that this type of scam is a growing problem that needs to be tackled," said the managing director of PSR Hannah Nixon.

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Tens of thousands of people have, combined, lost hundreds of millions of pounds to these scams, but the data we have seen so far is incomplete. We need a concerted and coordinated industry-wide approach to better protect consumers, and we need it to start today.

Authorised versus unauthorised push payments?

Simply put, a push payment is where a person or business transfers – or pushes – money from their bank account to another bank account.

This shouldn't be confused with an unauthorised push payment, where a fraudster obtains security information – for example through a phone hang-up scam – and transfers money without the account holder's knowledge.

Depending on the specific circumstances, for unauthorised push payments the financial ombudsman will order banks to refund the money involved.

For authorised push payments, the banks currently have much less liability. Regulators want the banking sector to work together to work more proactively and quickly to solve payments that, while authorised, are as a result of a scam.

In September, consumer group Which issued a super-complaint on behalf of consumers who were tricked into sending money to fraudsters, using an authorised push payment (APP).

Banks to stump-up?

Which said the current system "places little incentive on banks to manage the risks of relevant scams". It added:

Not surprisingly therefore there is much less evidence – compared to other payment types – for the banks developing systematic approaches to adequately manage the risks from scammers using bank accounts and payment systems to receive push payments.

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However, regulators stopped short of proposing that banks must automatically reimburse victims of APP scams.

Nevertheless, the PSR said it had "found evidence to suggest some banks could do more to identify potentially fraudulent incoming payments, and to prevent accounts falling under the influence of scammers".

Therefore, Nixon said: "More can be done to prevent these scams in the first instance, and to respond faster when it does happen, in order to give consumers more support and help in recovering their money."

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