PSR updates APP policies but ‘reimbursement alone cannot prevent fraud’

PSR updates APP policies but ‘reimbursement alone cannot prevent fraud’

The UK’s Payments Systems Regulator (PSR) has taken a significant step in improving consumer protection against Authorised Push Payment (APP) fraud.

Following consultations over the past few months, the PSR has opted to upgrade its reimbursement policy from 7 October 2024. This will see customers who lose money to APP fraud scams able to claim reimbursement of up to £415,000.

Regarding payments providers themselves, ‘sending’ payments firms can claim up to £100 ‘if they choose to’, in the event their platform is used for a fraudulent transaction. 

Chris Hemsley, PSR 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.”  

Combatting APP fraud has been on the PSR’s agenda for some time, with Hensley stating at the 1LoD Fraud Risk Event in London earlier this month that greater collaboration between the industry and government has led to some promising developments.

The PSR’s announcement has been broadly welcomed by the UK payments sector, with stakeholders noting that protecting customers against fraudulent activity is an important requirement.

A spokesperson for payments standards body PayUK remarked: “We welcome the publication of the PSR’s finalised legal instruments for the APP reimbursement regime which place requirements on payment service providers to reimburse victims of APP fraud. 

“We are playing our part, as directed by the PSR, in implementing the regime next year. We will continue our engagement with industry, regulators, and other stakeholders, including sharing our latest implementation plans as soon as possible.”

However, the PSR has also acknowledged the importance of individual responsibility and caution among consumers, stating that ‘consumers still need to take care when making payments’.

To factor this in, circumstances in which banks may judge that a person has not been careful have been laid out, such as if consumers receive interventions or warning messages from their bank.

Customers have also been reminded that they should notify their bank in the event of suspected fraud, share information with their bank to help assess a claim, and consent to fraud details being reported to police.

PSR asserts that by offering consumer protection but also providing banks and payments providers a role in assessing customer claims, it has found the ‘right balance’ between ensuring a ‘high level of protection’ with encouraging carefulness among consumers.

Emma Lovell, Chief Executive of the Lending Standards Board (LSB) said: “While mandatory reimbursement for Authorised Push Payment (APP) fraud is welcome, we cannot lose focus on the importance of fraud prevention – the only way to truly prevent customer harm from occurring. 

“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.”

Although requiring payments firms to adhere to the reimbursement requirements, the PSR has also introduced new incentives for companies to do more to prevent and detect fraud.

The costs of reimbursement will be split 50/50 between sending and receiving firms, with the incentives felt first by the receiving companies. Payment firms are not the only focus, however – PSR has added that social media and telecoms firms ‘can and should do more to prevent APP fraud’.

Commenting further on the new rules, Lovell said: “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.

“APP fraud means people are navigating a minefield of threats every time they shop online, click a link, or answer a call – with this type of fraud becoming increasingly complex, widespread, and convincing. As well as a financial impact, victims of fraud can also suffer devastating emotional repercussions.

“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.”