The Treasury Select Committee has criticised plans by the Payment Systems Regulator (PSR) to hand over responsibility for scam reimbursement to Pay.UK, a body sponsored by the banking industry.

The regulator has recently proposed that banks and building societies should fully reimburse victims of Authorised Push Payment (APP) scams within two days of the fraud being reported where the loss is over £100.

In a new report, the House of Commons-appointed Committee has described the new proposals as "fundamentally flawed" and an "inherent conflict of interest".

Treasury Committee chair Harriet Baldwin MP said that putting an industry body in charge of reimbursing scam victims is like “asking a fox to guard the henhouse”.

The Committee says that under the proposed measures, Pay.UK would be responsible for the very banks and building societies that are its own guarantors— some of which are “fundamentally opposed to the plans”— paying out large sums to reimburse victims.

It claims that this could result in the slowing down of the implementation of the reimbursement plans, which are already being delayed until next year.

“Victims of fraud have been waiting far too long for a fair and functional scam reimbursement scheme,” continued Harriet Baldwin MP. “However, while these new proposals are a step in the right direction, the way the regulator plans to implement them is fundamentally flawed.”

The PSR said the select committee's report includes a misinterpretation of its proposal on how its powers can be used to require reimbursement.

"Payment systems operators (including, for example, Pay.UK which operates Faster Payments and Bacs, or the card schemes which allow us to make card payments) have rules and requirements on their users," said a spokesperson from the PSR. "If a bank or other payment provider wants to use these systems, it has to follow the rules set out by the system operator. The PSR regulates these payment systems operators.

The organisation first consulted on a set of new measures focused on the publication of scam data, intelligence sharing, and mandatory reimbursement for APP scam victims in November 2021.

In January, British bank TSB warned that under the new plans a quarter of fraud victims could be denied reimbursement.

A quarter of fraud victims could be denied reimbursement under Payment Systems Regulator’s (PSR’s) proposed refund mechanism, British bank TSB has warned.

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