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TSB Offers to Cover APP Fraud Losses

UK bank TSB has promised to refund any customers that may be hit by so-called “authorized push payment” (APP) fraud, which is on the rise around the globe.

The high street lender is hoping to differentiate from its rivals, many of whom take a more uncompromising stance on this type of scam.

Unlike transaction fraud, account takeovers or account creation fraud, where the malicious activity happens without the victim’s knowledge, APP fraud occurs when an account holder is tricked into making a payment to another account.

There are two main types. In malicious payee fraud the victim authorizes a payment without realizing it's actually a scam, while in malicious redirection the victim intends to pay a legitimate payee but the fraudster directs them to pay a third-party instead.

TSB announced its Fraud Refund Guarantee on Monday, pointing to figures that over £1.2bn was stolen by fraudsters from UK banking customers last year.

Of that figure, a rather smaller sum of £354m was lost to APP fraud, although this had jumped 50% from 2017. APP fraud incidents soared by 90% from 2017 to 2018, although the surge could be down to more banks reporting these scams, according to industry body UK Finance.

“The vast majority of fraud claims across UK banking are from innocent victims of fraud, who have been targeted by criminals and organized gangs. However, all too often these customers must fight to be refunded and are not treated as victims of crime,” argued TSB executive chairman, Richard Meddings.

“We want to provide peace of mind to our customers, that’s why we’re proud to announce the TSB Fraud Refund Guarantee.”

As of January, new regulatory rules came into force designed to empower APP victims with greater powers of redress — by allowing them to complain to the bank that receives funds as well as their own.

However, lenders continue to take a hard line on customers who have fallen victim to such scams, which is why the Financial Ombudsman Service (FOS) and others are drawing up a voluntary code for the industry.

TSB will be hoping the new assurances on fraud reimbursements help to win back the support of its five million customers after major IT outages last year.

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