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(Bloomberg) — The UK payments industry is still fighting for changes to fraud-reimbursement rules with just a month to go before they’re enacted, even after a significant U-turn by regulators this week.
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In an 11th-hour push, the Payments Association wrote to City Minister Tulip Siddiq on Friday, calling for the maximum reimbursement for victims of authorized-push-payment fraud to be cut to £30,000 ($39,000) — a “more appropriate” amount that would still cover 95% of fraud cases, the group said.
That request comes even after the Payment Systems Regulator announced on Wednesday that it’s planning to lower the cap to £85,000 from £415,000 following months of lobbying from the payments industry and feedback from government officials. Under that cap, more than 99% of claims by volume would be covered, the regulator said. Authorized-push-payment fraud, where victims are tricked into sending money to criminals, led to £460 million in losses last year, according to research by trade group UK Finance.
Talks continued on Friday as City of London finance leaders including Bank of England Deputy Governor Sara Breeden, Revolut Ltd. UK head Francesca Carlesi and the Financial Conduct Authority Chief Executive Nikhil Rathi met over breakfast at Mansion House with Lord Mayor Michael Mainelli to discuss the payments industry’s role in UK economic growth.
Now, City firms are stepping up their calls for big tech to share the liability of fraud losses, with multiple banks saying that more than 60% of reported UK scams originate from sites such as Instagram.
“Social media and tech companies remain operating without the same immediate and punitive financial incentives to control fraud,” Philip House, chief governance and legal officer at ClearBank Ltd., said in an emailed statement. “The ‘polluter pays’ principle seems most fair here and would ensure that such firms have the same incentives to prevent fraud.”
Under current rules, firms such as Instagram parent Meta Platforms Inc. are outside the Payment Systems Regulator’s remit.
The Labour Party, which took over the UK’s government in July, has set out plans to include big tech in the battle against authorized-push-payment fraud. In a document seen by Bloomberg News, Labour laid out six principles for reform, including that “big tech companies who provide the platforms on which this fraud takes place must take their proper share of their responsibility for tackling APP fraud and reimbursing victims.”
Hundreds of financial firms are struggling to comply with the new regime, Bloomberg News has reported. Now, with a month to go before new rules go into effect on Oct. 7, less than 500 firms have been on-boarded onto the Pay.UK system — the organization that’s setting up the communication infrastructure for the settlement of reimbursements — which means about two-thirds of payments firms aren’t yet part of it, according to people with knowledge of the situation.
Still, the firms that have joined represent 95% of fraud volume, one of the people said.
A two-week consultation to receive additional responses from banks and payments firms about the new rules will run through Sept. 18, the Payment Systems Regulator said, and it will announce its final plan by the end of the month.
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