TSB warns new UK fraud refund policy could work against victims

TSB Bank has warned that a new fraud refund mechanism could potentially invalidate a quarter of all UK fraud claims.

The bank has asked the UK’s Payment Systems Regulator (PSR) to go back to the drawing board in light of the latter’s proposed refund method that became clear might actually make fraud victims not liable for compensation. 

A cause of concern became the words of Chris Hemsley, Managing Director of the PSR, when he was questioned by the Treasury Sub-Committee on Financial Services Regulations over the regulator’s decision to not make sub-£100 refund cases mandatory, instead leaving the final say to the discretion of banking entities.

“There is nothing in our proposal that would stop firms using their sensible discretion,” Hemsley said regarding the decision making of who should be reimbursed, which in theory means that the administrative process in the financial services industry should become less convoluted, leading to a more positive customer experience.

The refund policy sets the minimum limit for mandatory reimbursements at £100 by calculating that everything under that amount represents just 1% of the UK’s total fraud value altogether.

However, Hemsley’s comments revealed that a staggering 25% of all fraud victims fail to reach the minimum threshold, which not only levels those who have lost £1 with losses for up to £99, but also automatically makes those cases viable for an involuntary exemption. 

In addition, the new mechanism outlines that those lucky enough to have £100 or more stolen from them have to pay an excess fee of £35 when they are being refunded. 

And while TSB states that it is onboard with the majority of what the PSR has proposed, the bank has called for actions to revise the £100 qualifying minimum and £35 fee decision, adding proprietary data to the argument that confirms there is a large number of sub-£100 fraud cases and revealing purchase fraud as the main reason for over two-fifths of them (44%). 

Paul Davis, Director of Fraud Prevention at TSB, commented: “TSB’s Fraud Refund Guarantee has been protecting our customers for nearly four years and currently pays out to 98 percent of fraud victims, including those with losses under £100. 

We welcome these moves by the 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.”