PSR Bows to Bank Pressure, Leaving Fraud Victims in the Lurch with £85k Cap

Well, that didn’t take long. The Payment Systems Regulator (PSR) has performed an impressive U-turn, much to the delight of banks and the despair of scam victims. After all the bold promises to protect people from authorised push payment (APP) fraud with a hefty £415,000 reimbursement limit, they’ve now caved in to a bit of pressure from the banking elite and slashed it to a far more “manageable” £85,000. What a win—for the banks, that is.

The original plan to cap reimbursements at £415,000 for fraud victims was labelled by Treasury officials as a “disaster waiting to happen”—because, heaven forbid we make the poor banks pay for their customers being scammed (see our previous article). The real disaster, of course, would be the small fintech firms going under, or so the ministers would have us believe. After all, who cares about victims of fraud when there’s a few fintech businesses to protect, right?

Cue the Treasury and their banking buddies kicking up a fuss, and the PSR folding faster than a banker at a moral high ground conference. The result? A neat little £85,000 cap, aligning fraud reimbursement with the financial services compensation scheme (FSCS). Conveniently, this also means the banks can breathe a sigh of relief—they won’t have to cough up as much for the poor souls tricked out of their life savings.

And sure, the PSR’s managing director David Geale tried to sugar-coat it, saying they’ve “listened to concerns” and that most fraud cases are under £85,000 anyway, so, really, no harm done, right? According to him, consumers will still receive “world-leading protection” while the banks remain “incentivised” to crack down on fraud. Of course, by "world-leading protection", he must mean protection for the banks, not for the victims.

Consumer groups, understandably, aren’t impressed. Rocio Concha from Which? didn’t mince her words, calling the move “outrageous.” She’s right. It’s hard to see this as anything other than a capitulation to the lobbying efforts of firms that refuse to take fraud seriously. By slashing the reimbursement limit, we’re leaving victims of higher-value scams to pick up the pieces, both financially and emotionally.

Let’s not forget, this move also reduces the financial incentive for banks to tighten their anti-fraud measures. If they only have to pay back £85,000, where’s the motivation to actually stop fraud in the first place? It’s almost as if they’d prefer to maintain the status quo and let the customers deal with the fallout. Funny that.

Oh, and as if the reduced payout limit wasn’t enough, there’s also a shiny new proposal to allow banks to freeze payments for up to four days—because clearly, what every fraud victim wants is for their bank to hold their money hostage even longer. It’s all part of the government’s noble efforts to tackle fraud, first proposed by the Conservatives and backed by Labour. Apparently, holding your money for 24 hours wasn’t quite enough time to investigate suspicious payments, so now they’ll get 72 more hours to do… well, whatever it is they do.

It’s safe to say this latest move by the PSR isn’t exactly a triumph for consumer protection. The consultation on the £85,000 cap will run until September 18, but let’s be honest: the decision’s already been made. The banks have spoken, and once again, they’ve come out on top. As for the victims of fraud? They’ll just have to make do with a fraction of what was promised, while the financial industry pats itself on the back for another “victory” in the name of competition and innovation.