(Bloomberg) -- UK Economic Secretary to the Treasury Bim Afolami met with executives from companies including Revolut, Wise Plc and ClearBank on Tuesday to hear industry concerns over new fraud refund rules, according to people familiar with the matter.

The Payment Systems Regulator is trying to combat the surge in authorized push payment fraud, which tricks customers into moving their money to accounts controlled by criminals. From October, payment providers will be forced to refund as much as £415,000 ($527,340) to victims of scams. 

The number of APP cases climbed 12% last year, although the total amount lost fell slightly to £460 million, as more victims were fooled into paying for nonexistent goods, trade body UK Finance said Wednesday. 

Executives told Afolami the issue of fraud reimbursement could become a political headache, with the new system launching in the potential run-up to a UK general election, the people said, asking not to be identified discussing the private meeting. Afolami wanted to hear more about how the new cap would impact the fintech companies, they said. 

“The government is aware of the strong concerns raised by industry, and we encourage the PSR to engage with these,” a Treasury spokesperson said in an emailed statement. 

“Finally, someone has understood the concerns of the industry that has been long dismissed,” Riccardo Tordera-Ricchi, head of policy and government relations at the Payments Association, said in a statement. 

The meeting, which also included representatives from trade groups Innovate Finance and the Payments Association, came after 80 companies wrote to the Treasury to complain about the impending rules. Finance executives have warned that raising the refund limit to £415,000 poses a moral hazard, with consumers more likely to act recklessly if they know any losses would be covered. 

During the meeting, executives told Afolami that the industry believes a customer should have to file a police report before they can be reimbursed by banks or payment firms, one of the people said. Such a requirement isn’t part of the current rules and Afolami acknowledged the issue, the person said.

“We suspect there will be an increase in some forms of fraud,” Ben Donaldson, UK Finance’s managing director of economic crime, told journalists this week. He added there could be a risk of criminals using the reimbursement system to fund other forms of fraud.

“Government, regulators and industry need to work together to tackle fraud in the most effective way,” said Janine Hirt, chief executive officer of Innovate Finance. “Hopefully this discussion will support a closer examination of areas like the maximum reimbursement limit and implementation timetable.”

Afolami and other members of Prime Minister Rishi Sunak’s government have become increasingly outspoken about what they see as regulators hindering London’s competitiveness, hitting out at issues such as the Financial Conduct Authority’s proposal to name firms it’s investigating.  

“In periods of rapid change, you risk becoming extinct unless you can adapt and evolve accordingly,” Afolami told the finance industry at a conference this week. 

(Updates to add UK Finance fraud figures in third paragraph, industry comments from ninth paragraph.)

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