United Kingdom (and EU regulation)

PSR Consultation Paper CP22/4 ‘Authorised push payment scams: Requiring reimbursement’

By Simon Lovegrove (UK) on September 29, 2022 Posted in Payment Services, United Kingdom

On 29 September 2022, the Payment Systems Regulator (PSR) published Consultation Paper 22/4 ‘Authorised push payment scams: Requiring reimbursement’ (CP22/4).

Introduction

Authorised Push Payment (APP) scams happen when fraudsters trick someone into sending a payment to a bank account controlled by a fraudster. Once a victim realises that they’ve been scammed it’s often too late to stop it. Scam values vary, but in some cases they have a devastating effect on the victim’s life or business.

In July 2022, the government published the Financial Services and Markets Bill. This would allow the PSR to use its regulatory powers to require payment service providers (PSPs) to reimburse APP scam victims. It also places a duty on the PSR to take regulatory action.

CP22/4

In CP22/4, the PSR is proposing new measures to fight payment scams, based on PSPs reimbursing the victims. This reimbursement will be mandatory in most cases. The measure should protect people from fraud by giving PSPs good incentives to prevent scams, and making sure victims get their money back. The PSR proposes to include all categories of APP scam in the rules on mandatory reimbursement.

The PSR proposes to require all PSPs sending payments over Faster Payments to fully reimburse APP scam victims, with only limited exceptions. This will apply to consumers, micro-enterprises and charities. The exceptions will include scams where the consumer is involved in the fraud themselves, or where they have acted with gross negligence. It would not apply where a consumer was vulnerable.

The PSR wants the payment industry to change the way in which it manages APP scams. The PSR is proposing the following:

Require reimbursement.
Improve the level of protection for APP scam victims.
Incentivise PSPs to prevent APP scams, whether as a sending PSP (which has the account the payment is made from) or a receiving PSP (which has the account the payment is made to).

The sending PSP will have to reimburse the victim as soon as possible, and no more than 48 hours from the fraud being reported. If the PSP has evidence or reasonable grounds for suspicion of either first party fraud or gross negligence, it will have more time to investigate and can delay the payment.

Furthermore, the PSR proposes to allow PSPs to:

Have a minimum threshold for a reimbursement claim (of no more than £100)
Withhold an ‘excess’ (of no more than £35)
Set a time limit for claims (of no less than 13 months)

The PSR proposes to allocate the costs of reimbursement equally between sending and receiving PSPs, with a default 50:50 split.

These options may help PSPs ensure their customers take care in making small payments, minimise claims for civil disputed and maintain proportionate costs while protecting consumers appropriately. The PSR expects PSPs to apply these options in different ways, reflecting factors such as competition and operational efficiency.

Next steps

The deadline for responses to CP22/4 is 25 November 2022. The PSR welcomes feedback from all stakeholders and interested parties, not only entities regulated by the PSR. The PSR will set out its policy position and accompanying action in the first half of 2023.