Bank fraud cover will reportedly drop to £85,000

The maximum fraud loss banks will have to cover will fall from a planned £415,000 to £85,000, according to a report.

The Payment Systems Regulator (PSR) is expected to announce the relaxation of the refund scheme, which is due to come into effect in October, the Financial Times (FT) reports.

This came after government ministers and industry bodies called on the regulator to lower the limit, with both the Treasury and the FCA warning against a higher limit.

Suggestions have emerged that banks and fintechs could be forced to fully compensate victims of authorised push payment (APP) fraud up to a limit of £415,000, in a move that could cause long-term damage to the sector. City AM last month.

The scheme would come into effect on 7 October and would be distributed among the companies that send and receive the payment. In total, this concerns around 1,500 payment companies.

According to banking trade body UK Finance, Britons lost £459.7m to APP fraud last year. Industry insiders warn that firms can struggle to use claims management systems and have to report cases manually, making it harder to meet the five-day repayment deadline.

The Labour minister in the City, Tulip Siddiq, was reportedly “very concerned” that the October deadline could be too tight, while Finance Minister Rachel Reeves is also “concerned”, City AM reported.

An industry source previously speculated that “something will change – maybe a delay, maybe the threshold”, despite the PSR previously backing its plan.

There were also concerns that too high a level could lead to criminals abusing the compensation system, potentially driving smaller businesses out of business.

A PSR spokesperson declined to comment on the FT story.