Banks will have to reimburse all victims of Authorised Push Payment (APP) scams within a week under tough new rules to be introduced next year.
APP scams happen when someone is tricked into sending money to a fraudster posing as a genuine payee.
This type of scam has quickly become one of the most "significant" types of fraud accounting for nearly £500million in losses last year.
Under the new rules from the Payment Systems Regulator (PSR), banks and building societies will need to reimburse the victim for the amount lost to this type of scam within five business days.
Currently, banks and building societies do not need to do this.
However, many have signed up for a voluntary agreement which requires them to consider the cases but in practice, the funds lost often do not get repaid.
Some account providers, such as TSB, have their own fraud refund guarantees.
The new rules will cover scams done through Faster Payments – the payment system across which around 90% of APP fraud currently takes place.
That means that all the other payment systems, including cheques, BACS, CHAPS, Mastercard and Visa, are not covered by the proposed new rules.
However, the regulator says that it wants to expand the new fraud refund rules to cover these areas later on.
At the moment, the plan is for payment firms to be incentivised to take action, with both sending and receiving firms in the UK sharing the costs of reimbursing victims 50:50.
The PSR will flesh out exactly how the scheme works throughout the rest of this year - including any limits on how much can be claimed back as a fraud refund.
It will also confirm the exact date when the rules will be introduced - the plan is to introduce the new rules in 2024.
The PSR last year said it planned to introduce new rules to tackle APP fraud once the parliament expands the powers of the regulator.
The regulator says the new rules will mean customers are more protected as the industry will have clearer guidance to follow.
Chris Hemsley, managing director at the PSR, said: “Once implemented, our changes will deliver a major shift from the status quo, giving everyone across the payments ecosystem a reason to act to prevent fraud from happening in the first place.
“That means everybody who makes payments can do so with much greater confidence, knowing that they will be better protected against fraudsters.
“In delivering this step-change, the UK will be at the forefront of the fight against APP fraud globally.
“And by confirming these changes now, it means we will be ready to act once new laws come into effect.
“We will continue to work with Pay.UK, industry, consumers and organisations beyond the payments sphere to drive effective intervention and start to turn the tide against APP fraud.”
What to do if you think you’ve been scammed
If you think a scammer has got hold of your bank details, contact your bank straight away.
You can call the 159 hotline, which will connect you to your bank.
Passwords that have been leaked or compromised should be changed immediately.
Make sure you report scams and fraud to Action Fraud by calling 0300 123 2040, or through the Action Fraud website.
If you're in Scotland, report a scam through Advice Direct Scotland on 0808 164 6000 or on the Advice Direct Scotland website.
You can also report scams to Police Scotland on 101.
For scam emails, forward them to report@phishing.gov.uk, and for scam text messages, forward them to 7726 for free.
If you suspect a scammer is calling you, hang up immediately and search for the contact details online of the place you're supposedly being called from.
Never call back the number provided by the caller.
