People will continue to be able to easily access their cash and scam victims will be better protected under measures promised in the Financial Services and Markets Bill.
The Payment Systems Regulator (PSR) will be able to require banks to reimburse authorised push payment (APP) scam losses, totalling hundreds of millions of pounds each year, under the legislation.
This could help ensure that more people who are tricked into transferring money to a fraudster are reimbursed.
There has been an explosion of such cases in recent years, with scammers often posing as officials working for banks, the police or HM Revenue and Customs (HMRC) to dupe their victims.
We know that access to cash is still vital for many people, especially those in vulnerable groups
Currently, many banks have signed up to a voluntary reimbursement code, but there have been concerns about it being applied inconsistently.
Laura Suter, head of personal finance at AJ Bell, said: “The latest figures show that despite the banking industry’s pledges to reimburse victims, for every £1 stolen only 43p was being returned to victims last year.”
She said the scale of the problem meant £355.3 million was stolen in the first half of 2021 alone.
Ms Suter said the Bill “doesn’t mean every scam victim will definitely get their money back”.
What’s certain to happen is that banks will beef up their checks and processes
She said: “The regulator will come up with its own criteria for who can be reimbursed and who will be left to stomach their losses themselves. What’s certain to happen is that banks will beef up their checks and processes when anyone makes an online transfer if they are going to be the ones footing the bill for more of the fraud.”
Rocio Concha, director of policy and advocacy at Which?, said: “Scam victims currently face a reimbursement lottery depending on who they bank with, so the regulator must now be ready to ensure firms treat their customers consistently and fairly, with tough enforcement for those that break the rules.”
Ensuring that people can still access their cash with ease is one of the Bill’s main elements.
Economic secretary to the Treasury, John Glen, said: “We know that access to cash is still vital for many people, especially those in vulnerable groups. We promised we would protect it and through this Bill we are delivering on that promise.
“We are also sticking up for victims of financial scams that can have a devastating impact, by ensuring the regulator can act to make banks reimburse people who have lost money through no fault of their own.”
The move to protect the future of cash in law follows fears raised by consumer campaigners that “cash deserts” are being created, particularly in deprived and rural areas, as bank branches shut down or reduce their opening hours.
Around 5.4 million adults are thought to rely on cash to a very great or great extent in their daily lives.
The move, outlined in the Queen’s Speech, comes at a time when more people may turn to physical cash to help them stick to a budget, as prices surge.
According to the Post Office, £12 billion was deposited and withdrawn over its counters in the first four months of 2022.
The Post Office has an agreement with many banks that enables people to do their day-to-day banking over its counters.
Which? recently found just over half (52%) of regular cash users say it helps them to keep track of their spending – and a fifth (20%) of people who do not use banknotes and coins regularly said they would start using cash if the cost-of-living crisis worsens.
As people try to manage on tighter budgets, communities are seeing their access to cash dwindle, Which? said last week, with 4,685 bank branches closing since 2015, and 12,178 free-to-use ATMs vanishing since 2018.
Industry initiatives have been taking place to help maintain access to cash, such as cashback in shops and banking hubs where facilities are shared.
The Bill, which will apply across the UK, will also help to protect people from scams, with additional protections for those investing or using financial products. More details will be set out when the Bill is formally introduced.
It will sit alongside the Economic Crime and Corporate Transparency Bill, which will clamp down on money laundering and create powers to more quickly and easily seize and recover cryptoassets, which may be used in ransomware payments.
We look forward to working with the Government and Parliament on the development of the detailed proposals in both Bills
David Postings, chief executive of UK Finance, said: “The Economic Crime Bill will be critical in helping to address money laundering and the growth in fraud and scams, which are now the most prevalent type of crime in the UK.
“This Bill should focus on measures that prevent fraud happening in the first place and provide greater enforcement powers to tackle those who commit economic crime.
“We look forward to working with the Government and Parliament on the development of the detailed proposals in both Bills.”
John Howells, CEO of ATM network Link, said: “We strongly welcome today’s news and are pleased that the Government recognises that protecting access to cash is vital.
“We know that consumers are becoming increasingly digital and using alternatives to cash, but there are still 10 million people who rely on cash.
“A great deal of progress has been achieved by the banking industry over the past couple of years, in which Link has played a critical role. This is good news for any community in the future as we continue to protect access to cash services and we look forward to seeing the details of the Bill in due course.”
Today's announcement to legislate to protect cash is a huge step forward
Natalie Ceeney, chair, Access to Cash Review and Cash Action Group, said: “Today’s announcement to legislate to protect cash is a huge step forward. I applaud the Government for this commitment to supporting some of the most vulnerable people in society, as well as small businesses.
“A lot of great work has been done over the past couple of years by the banking industry and with this legislation, we can shift the conversation from whether we can protect cash to how we can best meet the needs of those who need it.”
Philip Bowcock, CEO of ATM provider NoteMachine, said: “The way ATMs are funded must be addressed as part of the legislation to ensure a long-term future for the free-to-use cash network.
“The focus on geographic requirements within the access to cash legislation must also be properly thought through – setting an ‘as the crow flies’ radius will make no real difference to consumers unless ease of accessibility is the primary consideration.”
