PSR bolsters UK consumer protection against APP fraud

Following consultations, the PSR confirms its new reimbursement requirement which will prompt a step-change in fraud prevention and see the vast majority of money lost to APP frauds reimbursed to victims.

The regulator’s statement confirms that the maximum level of reimbursement per claim will be set at GBP 415,000, and that this applies to all consumers. This is in line with the maximum award the Financial Ombudsman Service can make when considering complaints. This is an important decision for both consumers and industry and it involves difficult trade-offs. As a result, the regulator will monitor the incidence and impact of high value APP scams by October 2024 before the reimbursement requirement start date.

The PSR also confirms that ‘sending’ payment companies can – but do not have to – apply a claim excess of up to GBP 100 if they choose to. This does not include claims made by vulnerable consumers.

Payments must be carefully made

Consumers still need to take care when making payments. Reflecting this, the PSR also set out the circumstances when a bank might reasonably consider a person has not been sufficiently careful. For example, consumers should have regard to interventions (such as warning messages) from their bank; should promptly notify their bank of suspected fraud; share information with their bank to help them assess a claim; and consent to fraud details being reported to the police.

It will not be sufficient for a customer to have merely failed to meet one of these requirements, and the onus will be on the bank to prove that they acted with gross negligence. This is a very high bar, and the PSR expects that a small minority of cases will be subject to this exception. This exception does not apply to vulnerable consumers.

The PSR’s final decisions strike the right balance between encouraging people to be careful while making sure there are high levels of protection – particularly for those who lose larger sums of money to APP fraud.

Industry must comply with these obligations from 7 October 2024. The PSR wants to see people be protected from APP scams as quickly as possible, but recognises the need to ensure the critical systems needed to support the requirement must be in place.

Equal cost sharing for payment firms

The PSR has issued three legal instruments mandating Pay.UK and payment firms using the Faster Payments Scheme (FPS) to adopt the reimbursement policy. In addition to requiring reimbursement for victims, the PSR is intensifying incentives for payment firms to enhance efforts in detecting and preventing APP fraud. This involves sharing the reimbursement cost equally between sending and receiving firms, introducing incentives at the receiving end for the first time.

Also, for the first time in October 2023, the PSR published new data showing how well payment firms are dealing with APP fraud at an individual level.

Through this wider package of measures, the PSR’s goal is to transform the culture of payments to improve fraud prevention and focus all firms on protecting consumers and businesses.

While the PSR cannot introduce a financial incentive on fraud origination, social media, and telecom companies can and should do much more to prevent APP fraud. The PSR welcomes the publication of the UK’s Online Fraud Charter. This takes an important step forward to raise standards of protection against fraud on social media and telecoms platforms.