Treasury announces intention to legislate on APP scam reimbursement

HM Treasury published a policy paper on 10 May 2022 setting out that the government intends to legislate in the Financial Services and Markets Bill to enable regulatory action by the Payment Systems Regulator to require banks and other payment service providers to reimburse authorised push payment (APP) scam losses¹. The stated aim is "ensuring victims are not left paying for fraud through no fault of their own"¹.

The paper says the government will enable PSR action by clarifying that the regulator may use its existing powers under the Financial Services (Banking Reform) Act to require reimbursement in designated payment systems, including Faster Payments². It also addresses Regulation 90 of the Payment Services Regulations 2017, which concerns provider liability for payment orders; the government's amendment will make clear that this does not affect the PSR's ability to use its existing regulatory powers on APP scams². The government will place a duty on the PSR requiring it to publish a draft regulatory requirement for consultation within two months of the provisions coming into force, and to impose a regulatory requirement within six months².

The paper sets out the backdrop. Since 2016 the PSR and the payments industry have worked together on preventing payments fraud and on reimbursement mechanisms, including the voluntary Contingent Reimbursement Model Code, which began operating in 2019². Under that code, signatory payment service providers voluntarily reimburse APP scam victims; it has been signed by ten banking groups and covers 90% of relevant transactions². The government says reimbursement remains inconsistent, partly because some firms have made no voluntary commitment and partly because firms interpret their obligations differently². The PSR had previously said it could use its regulatory powers on APP scam reimbursement if legislative changes were made to the Payment Services Regulations 2017, and in November 2021 the Economic Secretary to the Treasury stated the government would legislate to address barriers to regulatory action on APP fraud².

The PSR's own account records that the legislation came into effect in June 2023, when the Financial Services and Markets Bill received Royal Assent³. The PSR then published a policy statement in June 2023 setting out its position on the reimbursement requirement, followed by a final policy statement in December 2023 that finalised points in the June paper without superseding it³. The PSR describes APP scams as cases where someone is tricked into sending money to a fraudster posing as a genuine payee, and says they include impersonation or romance scams³.

Why it matters for households

The 10 May 2022 announcement was a statement of intent, not a reimbursement rule in itself. The practical changes came later: the PSR's requirements cover everyone making a payment via Faster Payments or CHAPS from one UK bank account to another, with sending and receiving firms splitting the cost of reimbursement 50:50³. The PSR says customers will be more protected under consistent minimum standards, with most APP fraud victims reimbursed within five business days and additional protections for vulnerable customers³. The PSR also says it is unable to investigate individual cases of fraud³.

Separate figures cited by the PSR record £459.7 million lost to APP scams in 2023³. The PSR has also said it collected data showing where APP scams originate and would publish it later in 2024 to raise awareness of how fraudsters target victims, such as through social media platforms³. It lists the continued rollout of Confirmation of Payee, the name checking service designed to help prevent APP scams and misdirected payments, among wider changes it is leading³.

What happens next

Under the May 2022 plan, the PSR intended to publish a consultation on its preferred approach to APP scam reimbursement in Autumn 2022². The government's amendment was to be introduced when Parliamentary time allowed as part of the Financial Services and Markets Bill². The PSR records that the legislation took effect in June 2023³.