PSR published final APP scams reimbursement policy statement and legal instruments

In December 2023 the Payment Systems Regulator published its final PS23/4 APP scams reimbursement policy statement and three legal instruments, one of which is Specific Direction 19¹. The policy statement set out the final detailed parameters of the reimbursement requirement, which applies to payments made through the Faster Payments system². The PSR confirmed the policy start date of 7 October 2024².

The three legal instruments give effect to the reimbursement requirement: a specific requirement on Pay.UK to include the requirement in the Faster Payments scheme rules, a specific direction to Faster Payments participants obliging them to comply, and a specific direction to Pay.UK to create and implement a compliance monitoring regime². Specific Direction 19 requires Pay.UK to prepare proposals for monitoring compliance with the FPS reimbursement rules¹. Pay.UK was required to provide those proposals to the PSR by 5 April 2024¹.

The final parameters confirmed in December 2023 included a maximum level of mandatory reimbursement of £415,000, applying to all consumers, and an excess that sending payment service providers may charge of up to £100 per claim, which may not be charged to vulnerable consumers². The consumer standard of caution exception was narrowed to four specific circumstances: having regard to interventions, prompt notification, responding to requests for information and police reporting. That exception does not apply to vulnerable consumers². The sending PSP is not obliged to reimburse a claim submitted more than 13 months after the last payment in the case². A receiving PSP must send 50% of the cost of a reimbursement claim to the sending PSP if claimed, and 50% of any recovered funds must be returned to the sending PSP².

The PSR said the maximum level of reimbursement had attracted a particularly high level of feedback and involved difficult trade-offs, and that it would monitor the incidence and impact of high value APP scams over the ten months before the start date and may consult on revising the level ahead of October if there was convincing evidence to do so². The maximum cap will not automatically be indexed to inflation².

Why it matters for households

The reimbursement requirement applies to all reimbursable APP scam payments made on or after 7 October 2024; payments made before the policy came into effect are not within its scope³. Everyone making a payment via Faster Payments or CHAPS from one UK bank account to another is covered, with sending and receiving firms splitting the costs of reimbursement 50:50⁴. Most APP fraud victims are to be reimbursed within five business days, with additional protections for vulnerable customers⁴. From 7 October 2024, all directed PSPs, whether members of the Faster Payments Scheme or not, must comply with the FPS reimbursement rules³. A consumer who is themselves party to the fraud or dishonesty giving rise to their claim, including first party fraud, is ineligible for reimbursement³. Where a mule account is a feature of an APP scam, the in-scope transaction is the initial transaction between the victim and the mule; any onward transmission from the mule account to a fraudster is not an in-scope transaction³. The PSR is unable to investigate individual cases of fraud⁴.

What happens next

Pay.UK was required to submit its compliance monitoring proposals to the PSR for approval by 5 April 2024, and to publish the final Faster Payments reimbursement rules by 7 June 2024². All indirect access providers must send the PSR a list of indirect PSPs to whom they supply Faster Payments annually, from 31 March 2024². The PSR has since consulted on draft guidance supporting firms in distinguishing between APP scams and civil disputes; that consultation closed on 8 August 2024⁵. The PSR has also published a consultation on proposals to direct banks and other payment firms participating in CHAPS to reimburse customers who have been victims of APP scams⁶.