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Mandatory Reimbursement With Push Payment Scams In The U.K.

Mandatory Reimbursement With Push Payment Scams In The U.K.

A Major Breakthrough For U.K. Scam Victims

Victim Advocacy – A SCARS Insight

Fighting Authorized Push Payment Fraud: A New Reimbursement Requirement

This represents a major breakthrough for U.K. Scam Victims

Fraud is the largest contributor to crime in the UK, and authorized push payment (APP) scams continue to have a devastating impact on people who fall victim, with only 46% of reported cases being reimbursed.

The Payment Systems Regulator (PSR) has today published its policy statement on the new “world first” reimbursement requirement (https://www.psr.org.uk/publications/policy-statements/ps23-3-fighting-authorised-push-payment-fraud-a-new-reimbursement-requirement).

Table of Contents

Key Points:

  • Require payment firms to reimburse all in-scope customers who fall victim to APP fraud in most cases
  • Share the cost of reimbursing victims 50:50 between sending and receiving payment firms
  • Provide additional protections for vulnerable customers
  • Process to begin by end of 2023

The introduction of mandatory reimbursement for APP fraud (money transfer fraud) within the Faster Payments system aims to:

  • Incentivize the payment industry to invest in fraud prevention by making every payment firm meet the cost of reimbursing; and
  • Increase customer protection so that most victims of APP fraud are swiftly reimbursed

The new reimbursement requirement will apply to all Payment Service Providers (PSPs), with the cost of reimbursement to be shared 50:50 between sending and receiving payment firms.

Sending PSPs must reimburse customers within 5 business days. There will be a maximum level of reimbursement for APP fraud claims under the new reimbursement requirement; the PSR will consult on the appropriate maximum value and this will be published in PSR guidance in Q4 2023.

There is no minimum threshold. Customers will have 13 months from final payment to the fraudster in which to make a claim.

There are two exceptions to reimbursement under the new requirement:

  1. Where the customer has acted fraudulently (“first-party fraud”)
  2. Where the customer has acted with gross negligence

The PSR states that: “gross negligence is a high bar and, where suspected, the burden of proof is on the PSP”. The PSR interprets “gross negligence” to be a higher standard than the standard of negligence under common law i.e. the customer needs to have shown a very significant degree of carelessness.

The decision to retain the “gross negligence” exception (as per the CRM Code) was made to guard against the risk that if customers are more confident of being reimbursed, they will take less care in ensuring that their payee is not a fraudster.

Sending PSPs will have the option to apply a claim excess (the appropriate level for such excess will be consulted on in due course). However, the “gross negligence” exception and claim excess must not be applied to vulnerable customers. As part of assessing an APP fraud case, the sending PSP should assess the customer’s situation and any potential vulnerability in line with the FCA’s guidance (FCA, FG21/1 Guidance for firms on the fair treatment of vulnerable customers (February 2021).

The new reimbursement requirement will come into force in 2024. However, the PSR expects PSPs to start work now to implement the new reimbursement requirement. Tenet welcomes the new reimbursement requirement as we continue to see the devastating impact of APP fraud on both individuals and businesses alike.

Portions courtesy of TENET

The Official Statement of The UK Payment Systems Regulator

Left Open Quote - on RomanceScamsNOW.comPS23/3: Fighting authorised push payment fraud: a new reimbursement requirement

07/06/2023

Why we are publishing this document

We are introducing a new reimbursement requirement for Authorised Push Payment (APP) fraud within the Faster Payments system. APP fraud happens a when fraudster tricks someone into sending a payment to an account outside of their control.  APP fraud has quickly become one of the most significant types of payment fraud globally.

For the first time, our new reimbursement requirement will introduce consistent minimum standards to reimburse victims of APP fraud. The new reimbursement requirement is underpinned by several key policies. Essentially it will:

  • Require payment firms to reimburse all in-scope customers who fall victim to APP fraud in most cases
  • Share the cost of reimbursing victims 50:50 between sending and receiving payment firms
  • Provide additional protections for vulnerable customers

We are increasing protections within Faster Payments because currently the majority of APP fraud is enacted with a Faster Payment. The new reimbursement requirement will apply to all Payment Service Providers (PSPs) within the scope of the policy, this includes high-street banks and building societies but also smaller payment firms.

The new reimbursement requirement will come into force in 2024. We will consult on a specific start date alongside our draft legal instruments in early Q3 2023. We expect industry to start work now to implement the new reimbursement requirement.

What this document contains

This policy statement explains our decision to require all PSPs to make reimbursements available to all in-scope customers who become victims of APP scams. It confirms that we will implement this by issuing directions under Sections 54 and 55 of the Financial Services (Banking Reform) Act 2013.

It also sets out:

  • Which customers are to be considered as being within scope of the requirement;
  • How the cost of reimbursement will be shared between sending and receiving Payment Service Providers in each case;
  • The exceptions for when reimbursement does not have to be issued;
  • The time limit for Payment Service Providers to reimburse eligible cases;
  • Our intention to permit sending Payment Service Providers to charge a claim excess, and our intention to consult on what level that excess should be set at;
  • That we will no longer require a minimum threshold for claims to be valid;
  • That we will introduce a maximum level of reimbursement for APP fraud claims, by value, and that we intend to consult on the appropriate maximum level;
  • The time limits within which in-scope customers must make a claim for reimbursement;
  • Special protections for customers deemed vulnerable; and
  • Our proposed approach to multi-step fraud cases.

We have also published our cost benefit analysis and the responses to our consultation, along with our views to those responses.

Who should read this document

This document is relevant to the payments industry, consumer groups, payment service providers, and prospective qualifying customers who use Authorised Push Payments to send money and will be within scope of the policy, once implemented.

What happens next

We will engage in a series of workshops with interested parties in June and July in order to gather preliminary views and aid understanding.

We will then consult on:

  • The allowable claim excess that Payment Service Providers can charge (August 2023);
  • The maximum cap on reimbursement (August 2023);
  • The production of guidance on how to interpret the customer standard of caution of ‘gross negligence’(August 2023); and
  • A timeline for the reimbursement requirement to come fully into effect;
  • Draft Directions for Pay.UK (July 2023); and
  • A Draft Direction for Payment Service Providers (October 2023).

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2023-06-09T23:32:47-04:00June 9th, 2023|Categories: ♦ GOVERNMENT POLICY LAWS & REGULATION, 2023, Government Policies, Insights, Money Recovery, ♦ MONEY RECOVERY|Tags: , , , , , |

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