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PSR consults on APP fraud reimbursement overhaul


The UK Payment Systems Regulator (PSR) has launched two consultations ahead of the implementation of its new authorised push payment (APP) fraud reimbursement requirements. 

The PSR set out its final position on tackling APP fraud when using the Faster Payments Service In June. This will require banks, building societies, and other payment firms to reimburse in-scope customers, after deducting any optional excess, within five business days of a customer reporting having been the victim of a scam. The reimbursement timeline can be extended if the ‘stop-the-clock’ provision applies.

The PSR intends the proposed framework to incentivise payments firms to prevent APP fraud from happening in the first place, and also to underline the importance of consumers remaining cautious when making payments. Before the new reimbursement requirements come into force next year, the PSR said it will seek views on the maximum level of reimbursement and claim excess for customers who fall victim to APP fraud - as well as views on the consumer standard of caution guidance and gross negligence.  

Sending banks and other payment service providers (PSPs) will have the option of applying a claim excess, except when the consumer is considered ‘vulnerable’. There will be no minimum threshold for claims, but there will be a maximum limit. The PSR is now seeking views on the most appropriate way of structuring a claim excess, including whether an excess should be a fixed amount or a percentage of the reimbursement claim amount.  

The PSR proposes a maximum reimbursement level in line with the prevailing Financial Ombudsman Service limit of £415,000, which covers around 99.98% of APP fraud. The regulator is also consulting on whether the maximum level should apply to vulnerable consumers. Any maximum would not stop PSPs from voluntarily reimbursing customers more.

According to the PSR’s proposals, before making an APP, consumers should have regard to specific directed warnings given by their bank making clear that the intended recipient is likely to be a fraudster. However, a customer who nevertheless proceeds with the payment will not automatically be considered grossly negligent.

To assess the degree of a consumer’s negligence, PSPs will need to take into consideration the nature of the warning, the complexity of the APP scam, the consumer’s claims history, including their ‘propensity’ to fall for such scams, and whether the PSP could ‘reasonably be expected’ to have either paused or prevented the payment.