Proposals to reimburse hundreds of millions of pounds to scam victims in the United Kingdom are “fundamentally flawed,” lawmakers said in a report released on Monday.
Banks will be required to refund customers who have been duped into sending money to fraudsters within 48 hours, according to plans unveiled in September by the Payment Systems Regulator (PSR).
Scams involving “authorized push payments” have become the most common type of payment fraud in the United Kingdom, costing customers 583 million pounds ($715 million) by 2021.
Lawmakers on Britain’s powerful Treasury Select Committee slammed the plans, saying mandatory reimbursements should begin this year, not 2024.
The committee added that the PSR’s proposal for Pay. The UK, which operates Britain’s faster payments system, to handle reimbursements would result in an “inherent conflict of interest” because it is guaranteed by the financial services industry.
“Putting an industry body in charge of reimbursing scam victims is like asking a fox to guard the henhouse,” Treasury committee chair Harriett Baldwin said.
The PSR stated that it would take into account all feedback before publishing its final position in May of this year and that it regulated payment system operators such as Pay. UK.
A Pay. UK spokesperson said its bank guarantors did not influence its decision-making. “Our governance model is approved and supervised by the Bank of England and the PSR to ensure our independence,” the spokesperson added.
HSBC, NatWest, Lloyds, Barclays, Santander UK, and Virgin Money are among the banks that would be affected by the new rule.
Lenders have long stated that they should not bear the entire cost of online fraud, and that tech platforms used by criminals to lure victims should also pay.
A reimbursement model is required, according to the bank lobbying group UK Finance, but “we need greater cross-sector action, including shared accountability for fraud prevention and reduction, to help tackle the threat at source.”