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The Payment Systems Regulator (PSR) is considering extending its forthcoming authorised push payment (APP) fraud reimbursement rules to the Clearing House Automated Payment System (CHAPS).

This would build on the Bank of England’s existing requirements around reimbursement for direct banks and payments providers participating in CHAPS. These rules were only recently introduced, whilst the PSR’s separate APP reimbursement policy will come into effect on 7 October.

The PSR’s rules were unveiled in December 2023 with the reimbursement split 50/50 between the sending company and the recipient. The policy focuses specifically on scam victims who lose money through transactions over the Faster Payments System (FPS).

Extending the rules to CHAPS would significantly broaden the rules’ scope. CHAPS is the UK’s real-time gross settlement payment system, a same-day system used to settle high-value wholesale payments and time-critical lower value payments.

Kate Fitzgerald, PSR Head of Policy, said: “It is important that we make it harder for fraudsters to operate. Providing consistent incentives across payment systems is a crucial step in ensuring everyone does their best to tackle scams.”  

“The action we’re taking on APP scams is world-leading. It will help to close existing gaps and to make sure more payment firms across systems are incentivised to prevent scams from happening in the first place, while protecting those who do fall victim.”

The PSR believes that by matching the Bank of England’s move and adopting the APP fraud rules across both FPS and CHAPS it will be offering customers more consistent protection across the UK’s two major payments systems.

The regulator asserts that its approach to CHAPS will be as similar as possible to its approach to FPS. It also believes that by extending the rules it will incentivise payments firms to tackle scams and reduce the likelihood of criminals switching from FPS to CHAPS for fraudulent activity. 

According to a number of prominent banking and payments leaders, fraud risks have been increasing of late. Lloyds, TSB and Revolut, for example, have all warned about an uptick in scams, with social media platforms often used to perpetrate these crimes.

These new rules have left payments firms with a new landscape to navigate, however. Speaking to Payment Expert last month, Christine Reisman, Managing Director at Protiviti, shared her belief that risk-based approaches and internal strategies will be necessary for payments firms to adapt to these changes.

Meanwhile, other payments stakeholders – such as The Payments Association’s Head of Policy and Government Relations, Riccardo Tordera-Ricchi – believe that, whilst combating fraud is important, social media platforms and Big Tech also need to be considered, in addition to payments providers.

Regardless, the PSR is set on introducing its APP fraud reimbursement policy and is now concluding a consultation on extending the rules to CHAPS. The regulator expects to finalise and publish its specific direction in September 2024, intending to take the rules live for CHAPS on 7 October, the same day as FPS.

The regulator states that it is working closely with PayUK, payments firms and trade bodies to ensure the industry is prepared for implementation. The industry should already be making preparations to implement the reimbursement requirement, it asserts.