A new bank transfer fraud reimbursement code has been introduced, bringing in updated rules different from the previous code. The fresh set of regulations aims to protect individuals who fall victim to various scams such as purchase scams, romance frauds, and investment frauds. From Monday onwards, these victims will be covered by the new reimbursement code.
Under the supervision of the Payment Systems Regulator (PSR), the new code mandates banks to refund individuals who have been deceived into transferring money to fraudsters via bank transfers. One significant change is that the costs of reimbursement will now be shared between the sending and receiving banks, encouraging the receiving bank to take preventative measures to avoid such scams.
Previously, a voluntary reimbursement code was in place since 2019, overseen by the Lending Standards Board (LSB). However, the new code is now compulsory, superseding the old one. The protections under the new code apply to individuals, microenterprises, and charities with an annual income of less than £1 million.
Not all account providers are required to adhere to the new code. While major high street banks and smaller payment firms are included, credit unions are notably exempt from the new reimbursement arrangements. The protection under the code specifically applies to UK bank transfers conducted through Faster Payments or Chaps systems.
Individuals making claims can expect to be reimbursed within five business days from October 7th. However, firms are allowed to extend this period by “stopping the clock” temporarily to gather additional information. To prevent delays, firms must conclude the reimbursement process within 35 business days.
The new reimbursement limit is set at £85,000, with the option for banks to surpass this amount at their discretion. An optional excess of up to £100 may also be imposed by firms, although this cannot be applied to vulnerable consumers. For amounts exceeding the limit and remaining unreimbursed, victims can seek recourse through the Financial Ombudsman Service (FOS).
In cases where individuals are found complicit or grossly negligent in the fraud, they will not be eligible for a refund. Gross negligence is defined as a high standard, excluding vulnerable consumers from this exception. It is crucial for individuals to stay vigilant and alert their banks immediately of any suspected scam payments to mitigate financial losses.
To safeguard against scam payments, individuals are advised to heed warnings from their banks, especially regarding suspicious transactions. Engaging with the Confirmation of Payee name-checking service can also prevent impersonation scams. The Take Five to Stop Fraud campaign emphasises the importance of pausing and verifying before making payments, reducing the risk of falling victim to fraudulent activities.