On 7 June 2023, the Payment Systems Regulator (PSR) published Policy Statement PS23/3: Fighting authorised push payment fraud: a new reimbursement requirement: Response to September 2022 Consultation (CP22/4) (PS23/3).
In PS23/3 the PSR confirms that it is introducing a new reimbursement requirement for authorised push payment (APP) fraud within the Faster Payments system. The new reimbursement requirement will be underpinned by ten key policies:
- Reimbursement requirement for APP fraud within Faster Payments. Subject to certain exceptions and limits, sending payment service providers (PSPs) must reimburse all customers who fall victim to APP fraud. The reimbursement requirement does not apply to: civil disputes, payments which take place across other payment systems, international payments and payments made for unlawful purposes.
- Sharing the cost of reimbursement. Receiving PSPs must pay sending PSPs 50% of the reimbursement that the sending PSP paid to the customer. A time period will be set by Pay.UK with an ultimate backstop to ensure receiving PSPs reimburse sending PSPs.
- Exceptions for APP fraud claims. There are two exceptions to reimbursement (noting the other policies) under the new reimbursement requirement where the customer has acted: (i) fraudulently (‘first-party fraud’) or (ii) with gross negligence. This is the customer standard of caution for APP fraud claims.
- Time limit to reimburse. Sending PSPs must reimburse customers within five business days under the new reimbursement requirement. For specific actions, the sending PSP can ‘stop the clock’.
- Claim excess. Sending PSPs have the option to apply a claim excess under the new reimbursement requirement. The PSR will consult on the appropriate level for this and publish the maximum excess in PSR guidance in Q4 2023.
- Minimum threshold. There is no separate minimum value threshold for APP fraud claims under the new reimbursement requirement.
- Maximum level of reimbursement. There is a maximum level of reimbursement for APP fraud claims (by value) under the new reimbursement requirement. The PSR will consult on the appropriate maximum value for APP fraud claims and publish this in PSR guidance in Q4 2023.
- Time limit to claim. Sending PSPs have the option to deny APP fraud claims submitted more than 13 months after the final payment to the fraudster.
- Treatment of vulnerable customers. The customer standard of caution and claim excess must not be applied to vulnerable customers.
- Approach to ‘multi-step’ fraud cases. The new reimbursement requirement applies to the Faster Payment to an account controlled by a person other than the customer, where the customer has been deceived into granting that authorisation for the payment as part of an APP fraud.
The PSR will direct Pay.UK to put the new reimbursement requirement into Faster Payments rules using its powers under section 55 of the Financial Services (Banking Reform) Act 2013. This will be supported by a general direction under section 54 on all in-scope PSPs, which will place a regulatory obligation on these firms to comply with the relevant Faster Payments rules.
The new reimbursement requirement will come into force in 2024. The PSR will consult on a specific start date alongside its draft legal instruments in early Q3 2023. The PSR expects industry to start working now to implement the new reimbursement requirement.