PSR to consult on claim excess and reimbursement cap

The Payment Systems Regulator (PSR) has set out how mandatory reimbursement for authorised push payment (APP) fraud will work, and will consult in August 2023 on the allowable claim excess that payment firms can charge, the maximum cap on reimbursement, and guidance on how to interpret the customer standard of caution of gross negligence¹.

The policy statement, PS23/3, confirms the PSR will require all payment service providers (PSPs) within scope to make reimbursements available to in-scope customers who fall victim to APP scams, implemented through directions under Sections 54 and 55 of the Financial Services (Banking Reform) Act 2013¹. The requirement applies to all PSPs in scope, including high-street banks and building societies as well as smaller payment firms, and covers the Faster Payments system, where the majority of APP fraud currently takes place¹. Which? reports this will apply to over 1,500 PSPs, compared with the 10 banks and building societies signed up to the voluntary CRM Code².

The PSR says it will no longer require a minimum threshold for claims to be valid, removing plans for a £100 minimum threshold, and will introduce a maximum level of reimbursement by value, on which it intends to consult¹. Sending PSPs may be permitted to charge a claim excess, with the level to be consulted on¹. The PSR also sets out time limits for customers to claim and for firms to reimburse eligible cases; Which? reports sending PSPs must reimburse customers within five business days and that firms can reject claims submitted more than 13 months after the final payment to the fraudster². Costs will be shared 50:50 between sending and receiving payment firms, and there will be additional protections for vulnerable customers¹. Firms will not reimburse customers who have acted fraudulently or with gross negligence, which Which? describes as a high bar with the burden of proof on the PSP, and customers deemed vulnerable to a specific type of APP fraud are not subject to the gross negligence test or claim excess².

The PSR says the new reimbursement requirement does not currently apply to international payments, other payment systems such as card payments, cryptocurrency transfers and CHAPS transactions, or "on us" payments where the fraudster uses an account provided by the victim's own PSP². Which? reports that in 2022 victims lost £485.2m to APP fraud and that only 59% of losses were returned to victims².

Why it matters for households

People who are tricked into sending a Faster Payment to a fraudster will, from 2024, fall under a single set of minimum reimbursement standards rather than the voluntary CRM Code that currently covers a small number of banks¹. The amount a victim can be asked to bear themselves depends on two figures not yet decided: the claim excess a sending firm may charge, and the maximum cap on reimbursement, both subject to consultation in August 2023¹. The removal of the planned £100 minimum threshold means smaller losses are not excluded on size grounds¹. Whether a refund can be refused turns on the consumer standard of caution and gross negligence, with vulnerable customers exempt from both the gross negligence test and the claim excess². Claims must be made within the time limits set out, reported as 13 months from the final payment to the fraudster². Losses on international payments, card payments, cryptocurrency transfers, CHAPS and "on us" payments are outside the requirement as it stands².

What happens next

The PSR will hold workshops with interested parties in June and July 2023, then consult on the claim excess, the maximum cap on reimbursement and gross negligence guidance in August 2023, with draft Directions for Pay.UK in July 2023 and a Draft Direction for PSPs in October 2023¹. Which? reports the PSR will publish the claim excess, maximum reimbursement level, gross negligence guidance and all legal instruments by the end of 2023, with the requirement coming into force in 2024². The PSR says it will consult on a specific start date alongside its draft legal instruments in early Q3 2023¹.