Industry figures show victims lost £485.2m to APP fraud – where individuals or businesses are tricked into sending money to an account controlled by a fraudster – in 2022.
Following consultation, the Payment Systems Regulator (PSR) has now set out how a mandatory scheme will work in practice.
undefinedNew rules to protect APP fraud victims
undefinedThe PSR will require all payment service providers (PSPs) using Faster Payments (the payment system across which the vast majority of APP fraud currently takes place) to meet minimum standards for reimbursement. This will apply to over 1,500 PSPs – a big step up from the 10 banks and building society currently signed up to the voluntary CRM Code.
undefinedThe new rules will be underpinned by several key policies:
In 2022, only 59% of APP fraud losses were returned to victims (either direct refunds or recovered by the receiving bank). Under the new rules all fraud losses will be reimbursed, other than in exceptional circumstances.
The new rules will mean both sending and receiving firms will be incentivised to take action to prevent fraud, and where customers do fall victim to fraud, sending PSPs must reimburse customers within five business days.
There is also a time limit for claims, as firms can reject fraud claims submitted more than 13 months after the final payment to the fraudster. However, the PSR has removed plans to introduce a £100 minimum threshold, which was originally included to ‘mitigate against potential unintended consequence of increased moral hazard’, where customers take less care when making payments.
Claim exccess and cap to be decided
The PSR has said it intends to consult further on details such as the allowable claim excess that payment providers can charge victims and maximum cap on reimbursement.
There are still gaps in fraud protection
notThe PSR said 'work is underway to consider whether the new reimbursement requirement (or equivalent protections) should apply to other payment systems'.
While it does not regulate 'on us' payments (where the fraudster uses an account provided by the victim’s own PSP), the PSR said firms should reimburse APP fraud in the same way as Faster Payments.
When will the new rules come into force?
The PSR will be able to direct firms to reimburse fraud victims under the Financial Services and Markets Bill currently making its way through Parliament. The Bill is expected to receive Royal Assent in 2023, after which the PSR will be able to enforce its requirements on payment firms.
The voluntary CRM Code requirements are expected to stay in place until the new reimbursement requirement comes into force, though there is nothing to stop PSPs from voluntarily reimbursing victims of APP fraud now. The Government has said it is also looking at how to enable banks to have the ability to identify and pause suspicious payments inflight where appropriate.
Which? response: 'new rules must be properly monitored'
Rocio Concha, Which? Director of Policy and Advocacy, said: 'APP fraud continues to have a devastating financial and emotional impact on victims, yet they are currently being let down badly by banks when it comes to getting their money back, so it's hugely encouraging to see new rules which should lead to the overwhelming majority of victims getting reimbursed.'
'New rules must be properly monitored to ensure firms comply, with tough enforcement action for those that fall below the required standards. With many victims losing life-changing sums of money to increasingly sophisticated scams, it will also be important that the regulator does not set the maximum level of claims too low, or exclude different types of fraud from the reimbursement obligation, which could see some people blocked from getting their money back.'
source https://www.which.co.uk/news/article/new-rules-for-bank-transfer-fraud-reimbursement-from-2024-aqrE47v8j59Y