- New reimbursement requirement comes into force on 7 October 2024
- Upper claim limit will match the FOS upper limit of £415,000 and a claim excess of no more than £100 may be applied
- Finalised consumer standard of caution outlined
The PSR is leading the way globally by introducing consumer protections against Authorised Push Payment (APP) fraud.
Today, following consultations over the last few months, the regulator confirms its new reimbursement requirement which will prompt a step-change in fraud prevention and see the vast majority of money lost to APP frauds reimbursed to victims.
The policy statement confirms that the maximum level of reimbursement per claim will be set at £415,000, and that this applies to all consumers. This is in line with the maximum award the Financial Ombudsman Service can make when considering complaints. This is an important decision for both consumers and industry and it involves difficult trade-offs. As a result, the regulator will monitor the incidence and impact of high value APP scams over the next ten months before the reimbursement requirement start date.
The PSR also confirms that ‘sending’ payment firms can – but do not have to – apply a claim excess of up to £100 if they choose to. This does not include claims made by vulnerable consumers.
Consumers still need to take care when making payments. Reflecting this, the PSR also set out the circumstances when a bank might reasonably consider a person has not been sufficiently careful. For example, consumers should have regard to interventions (such as warning messages) from their bank; should promptly notify their bank of suspected fraud; share information with their bank to help them assess a claim; and consent to fraud details being reported to the police.
It will not be sufficient for a customer to have merely failed to meet one of these requirements, and the onus will be on the bank to prove that they acted with gross negligence. This is a very high bar, and the PSR expects that a small minority of cases will be subject to this exception. This exception does not apply to vulnerable consumers.
The PSR’s final decisions strike the right balance between encouraging people to be careful while making sure there are high levels of protection – particularly for those who lose larger sums of money to APP fraud.
Industry must comply with these obligations from 7 October 2024. The PSR wants to see people be protected from APP scams as quickly as possible, but recognises the need to ensure the critical systems needed to support the requirement must be in place.
Chris Hemsley, the PSR’s Managing Director, said:
“The action we’re taking significantly increases the level of protection for people and puts the UK at the forefront of APP fraud protections globally. Our approach incentivises banks and other payment firms to prevent APP fraud from happening in the first place while ensuring victims are protected in a consistent way.
“Payment firms are already getting ready by improving fraud controls and more people are getting their money back. We now expect the momentum to implement the full protections to increase.
“We’ll be working closely with Pay.UK and payment firms to make sure they’re fully prepared to implement the new requirement next year.”
Today the PSR has also published the three legal instruments which require Pay.UK and all payment firms that use Faster Payments Scheme (FPS) to implement the requirements of the reimbursement policy.
Alongside the new requirement to reimburse victims, the PSR is significantly increasing the incentives on all payment firms to do more to detect and prevent APP fraud from happening in the first place. This includes splitting the cost of reimbursement 50:50 between sending and receiving firms - putting incentives in at the receiving end for the first time.
Also, for the first time in October, the PSR published new data showing how well payment firms are dealing with APP fraud at an individual level.
Through this wider package of measures, the PSR’s goal is to transform the culture of payments to improve fraud prevention and focus all firms on protecting consumers and businesses.
While the PSR cannot introduce a financial incentive on fraud origination, social media and telecoms firms can and should do much more to prevent APP fraud. The PSR welcomes the publication of the UK’s Online Fraud Charter. This takes an important step forward to raise standards of protection against fraud on social media and telecoms platforms.