PSR publishes policy statement on new APP fraud reimbursement requirement

The Payment Systems Regulator (PSR) published a policy statement in June 2023 setting out a new authorised push payment (APP) fraud reimbursement requirement¹. The policy statement explains the PSR's decision to require all payment service providers (PSPs) to make reimbursements available to all in-scope customers who become victims of APP scams². The PSR said it will implement the requirement by issuing directions under Sections 54 and 55 of the Financial Services (Banking Reform) Act 2013².

The PSR also published a consultation on two of its draft directions, described as the legal means to put the new requirements in place¹. The first covers rule changes needed within the Faster Payments System (FPS); the second focuses on making sure Pay.UK, the operator of FPS, has an effective monitoring regime to measure whether payment firms are consistently complying with the reimbursement requirements¹. A third direction, which the PSR said will see all payment firms reimbursing victims of APP fraud, was to be consulted on separately in October¹. The PSR said it was proposing an implementation date of 2 April 2024¹.

The policy statement set out the main parameters of the requirement³:

The PSR said the requirement will apply to all PSPs within the scope of the policy, including high-street banks and building societies but also smaller payment firms². It said it will no longer require a minimum threshold for claims to be valid, and that it intends to permit sending PSPs to charge a claim excess, with the level to be consulted on². It also said it will introduce a maximum level of reimbursement for APP fraud claims by value, and intends to consult on the appropriate maximum². The PSR said the majority of APP fraud is currently enacted with a Faster Payment².

The PSR said the 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 implemented¹.

Why it matters for households

The requirement concerns people who are tricked into sending money to a fraudster by bank transfer, known as authorised push payment fraud. Under the policy, sending payment firms would reimburse in-scope customers who fall victim in most cases, with the cost split 50:50 between the sending and receiving firms³. The PSR set a time limit of five business days for reimbursement, with a stop the clock provision, and a time limit of 13 months from the last payment for customers to claim³. Gross negligence and first party fraud are listed as exceptions, and the PSR said gross negligence and any excess would not apply to vulnerable customers³. The PSR said it would no longer require a minimum threshold for claims to be valid². The value of the claim excess and the maximum level of reimbursement were still to be consulted on at the time of the policy statement³. The PSR said the new requirement will come into force in 2024, and proposed 2 April 2024 as the implementation date¹.

What happens next

The PSR said it would engage in a series of workshops with interested parties in June and July 2023 to gather preliminary views and aid understanding². It then planned to consult on the allowable claim excess (August 2023), the maximum cap on reimbursement (August 2023), guidance on how to interpret the customer standard of caution of gross negligence (August 2023), a timeline for the requirement to come fully into effect, draft directions for Pay.UK (July 2023), and a draft direction for payment service providers (October 2023)². The consultation on the two draft directions closed on 25 August 2023¹. The consultation on the consumer standard of caution closed on 12 September 2023⁴, as did the consultation on the excess and maximum reimbursement level for FPS and CHAPS⁵.