Further extension for APP fraud compensation confirmed

Nine banking groups are signed up to the code including the major UK banks and challengers like Metro Bank.

This extension is the third so far, with legislation still to be put forward for a long-term and sustainable funding model.

Figures from UK Finance show only 38% of losses assessed under the voluntary code were reimbursed in the first half of 2020.

Further extension

Until 30 June 2021, victims of APP fraud may receive full reimbursements of any money lost due to a scam.

Seven banking groups have agreed to continue funding the code until then: Barclays, HSBC (including First Direct and M&S Bank), Lloyds Banking Group (covering Lloyds Bank, Halifax, Bank of Scotland and Intelligent Finance), Metro Bank, Nat West Group (covering Royal Bank of Scotland, Nat West and Ulster Bank), Nationwide, and Santander (including Cahoot and Carter Allen Limited).

The Co-operative Bank is also a signatory, operating a self-model to reimburse customers, while Starling Bank covers customers in situations where both the customer and their payment service provider meets the required standards in the voluntary code.

TSB have their own Fraud Refund Guarantee which launched in April 2019.

Sustainable solution

The APP voluntary code came into force in May 2019 as an interim funding measure for scam victims while a more permanent funding solution was found.

It has subsequently been extended three times: to March 2020, to December 2020, and now until the end of June 2021.

UK Finance say this further extension will allow the Government to introduce new legislation for the long-term, and to engage with regulators and banking providers on a sustainable funding solution.

On a practical level, given the impact of coronavirus during 2020, it's understandable that finding a long-term solution for reimbursing victims of APP fraud has slipped down the agenda.

What may be less clear, however, is whether there is enough of a consensus among regulators and banks to bring forward legislation before this latest extension runs out.

APP fraud

The latest figures we have from UK Finance show customers lost £126.5m to APP fraud in the first half of 2020. Of this, £47.9m compensation was paid to customers, 38% of the total losses.

This figure is down on the percentage recorded in 2019, when 41% of cases assessed under the voluntary code resulted in compensation being paid.

Overall, a total of £89.2m has been reimbursed to customers since the scheme launched in May 2019, yet that figure is still less than the amount lost in just the first half of 2020.

So, being a victim of an APP scam doesn't guarantee a refund under the voluntary code, with banks still able to reject claims if they think a customer has been negligent or has ignored advice they have previously been given.

Worrying research published by Santander in June 2020 found 45% of Brits would willingly move their money to so-called safe accounts if they were prompted to by someone in authority such as a police officer or bank adviser.

There were also concerns the coronavirus outbreak was increasing the number of scams, with 74% of people worried that their isolating friends and family might fall victim to such a scam.

Until the figures for the second half of 2020 are released early next year, we won't know if those fears were justified, but it's clear a long-term solution for funding is needed now more than ever.

Learn more about fraud and how likely it is.