PSR’s new APP fraud reimbursement requirement puts UK ‘at the forefront’

Ellie Duncan
19 Dec 2023

The Payment Systems Regulator (PSR) has revealed the details of its new Authorised Push Payment (APP) fraud reimbursement requirement, ahead of the scheme’s implementation on 7 October 2024.

It confirmed the maximum level of reimbursement per claim will be set at £415,000, in line with the maximum award the Financial Ombudsman Service can make when considering complaints.

Following consultations, the PSR has also confirmed that ‘sending’ payment firms have the option to apply a claim excess of no more than £100.

The PSR revealed it has “significantly” increased the incentives on all payment firms to do more to detect and prevent APP fraud from happening in the first place, by splitting the cost of reimbursement 50:50 between sending and receiving firms, marking the first time incentives have been put in at the receiving end.

In addition, the regulator has established the circumstances in which a bank might consider that a customer “has not been sufficiently careful”, with the onus on the bank to prove that their customer acted with gross negligence, although this will not apply to vulnerable customers.

For example, consumers will be expected to have regard for interventions from their bank, such as warning messages, and should “promptly” notify their bank of suspected fraud, as well as consent to fraud details being reported to the police.

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,” he added.

“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.”

The PSR has published the three legal instruments which require Pay.UK and all payment firms that use Faster Payments to implement the requirements of the reimbursement policy.

Emma Lovell, CEO of the Lending Standards Board

Emma Lovell, chief executive officer of the Lending Standards Board, welcomed the mandatory reimbursement for APP fraud, but urged the industry not to “lose focus on the importance of fraud prevention” as “the only way to truly prevent customer harm from occurring”.

She said: “Unlike the incoming framework, the existing Code requires signatory firms to take steps to prevent APP fraud from happening in the first place. It is vital that progress made in these areas does not fall away after October 2024.

“Alongside the new reimbursement rules, there is a clear need for a new APP Fraud Prevention Standard, overseen and enforced by an independent body, to ensure the industry has a consistent approach to stopping scams.”

Lovell added: “Reimbursement alone cannot reverse the emotional distress that APP fraud causes, nor can it prevent the proceeds of fraud from being channelled towards criminal activity. Without a consistent approach to prevention, the risk is that APP fraud – and consumer harm – will accelerate again.”

In October, the PSR published, for the first time, data showing the full extent of how well banks and other payment firms are tackling APP fraud and their treatment of those who fell victim to scams.