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Payments Industry Seeks Delay in APP Fraud Rules Amid New Leadership at PSR

Summary of Development

The Payments Association is urging for a delay in the rollout of new authorised push payment (APP) fraud rules, leveraging the recent leadership change at the Payment Systems Regulator (PSR) as a pivotal moment to push for reconsideration. 

Chris Hemsley, who led the PSR since 2019, stepped down at the start of June. David Geale, previously director of retail banking and payments supervision at the Financial Conduct Authority, has stepped in as interim managing director for nine months. 

Geale now faces immediate calls from the Payments Association to postpone the APP fraud rules to ensure that the necessary infrastructure and policies are in place. 

APP fraud has rapidly become one of the most significant types of fraud in the UK, with losses totalling nearly £500million last year. This surge has intensified pressure from consumer groups and politicians on banks to expedite reimbursement for victims. In response, the PSR will enforce a £415,000 maximum reimbursement level from October, aiming to cover the majority of money lost to APP fraud. 

However, the Payments Association and some of its members argue that this cap could harm smaller payment providers. In May, they wrote to the Economic Secretary to the Treasury, Bim Afolami, advocating for a lower cap of £30,000, which aligns more closely with the average APP fraud loss. They contend that this would be more manageable for providers while still offering substantial protection to victims. 

Hemsley’s resignation represents a new opportunity for both immediate and future collaboration between the payments industry and one of its most important regulators, according to The Payments Association. 

In a private briefing paper shared with Geale, the association highlights the community’s concerns and proposed actions: principally a 12-month postponement of the full implementation of authorised push payment fraud rules in its current form, to ensure “the right policies, technology and systems are in place to avoid permanent damage to the UK’s payments industry and its ability to enable safe, instant, cheap and convenient payments”. 

Tony Craddock, director general of The Payments Association, said: “This move by the PSR represents a prime opportunity to re-set the relationship between the payments industry and one of its most important regulators. We believe that to mitigate systemic risk and prevent damage to the payments industry from some of the PSR’s current plans, significant changes are needed.” 

A key concern is the readiness of Pay.UK, the operator of the Faster Payments System (FPS), to effectively monitor and ensure compliance with the new reimbursement requirements. The rule changes require the FPS to ensure that Pay.UK implements an effective monitoring regime to measure whether payment firms consistently comply with the reimbursement requirements.