We have been consulting on proposals to make reimbursement of APP scams mandatory and have received a wide range of views from industry, consumer groups and the TSC sub-committee on Financial Services Regulations. There is broad support for our proposals to make sure people are reimbursed and to improve fraud prevention.
All feedback received, including from the TSC sub-committee, will be considered carefully before we make any final decision on the best course of action to make sure people are properly protected from these devastating scams. We will publish our final position in May 2023.
Payment systems operators (including, for example, Pay.UK which operates Faster Payments and Bacs, or the card schemes which allow us to make card payments) have rules and requirements on their users. If a bank or other payment provider wants to use these systems, it has to follow the rules set out by the system operator. The PSR regulates these payment systems operators.
In our consultation on APP scams, we set out proposals for the reimbursement rules, which we will define. We also set out our view that the most effective way to make sure victims of APP scams are reimbursed is by using our statutory powers to require changes to Pay.UK’s rules. This would mean if any financial firm wants to use the Faster Payments system, they will only be able to do so by adhering to the system rules, including around APP scam reimbursement.
Our consultation also considered whether we would use our powers more broadly, by placing further regulatory requirements on payment firms to secure compliance with the requirements in Faster Payments rules.
We are pleased that the TSC supports our proposal around reimbursement in principle. However, the report does include a misinterpretation of our proposal on how our powers can be used to require this. We have provided clarification to the TSC on this matter.
- The PSR is working to improve the protections against Authorised Push Payment fraud, and to improve the incentives to prevent these frauds from happening in the first place. The PSR proposals sit alongside the considerable work that is also needed from legislators, other regulators and companies (both within financial services and in the social media and telecoms sectors) to help prevent the frauds from happening in the first place.
- The PSR’s consultation was published in November 2022. The PSR will only be able to direct mandatory reimbursement once parliament has granted it the right powers through the Financial Services and Markets Bill. This Bill is still making its way through parliament. By consulting when it did, the PSR will be in a strong position to make this requirement as soon as possible, after the relevant legislation has received Royal Assent.
- Consumer protection rules already exist today in Pay.UK’s rule book (for example the Direct Debit Guarantee in Bacs). Card schemes also have rules in place to ensure consumer protections are applied for people making card payments.
- We are still considering the ways in which the PSR might use its formal powers. This includes consideration of whether to give additional directions to any organisation which uses Faster Payments.