Starting from 7 October 2024, UK consumers facing authorised push payment (APP) fraud will benefit from a significant boost in protection. Under new guidelines issued by the Payment Systems Regulator (PSR), victims of such scams can now claim reimbursements of up to £415,000. This new requirement heralds a major leap in fraud prevention and ensures consistent support for fraud victims across banking platforms.
A Step-Change in Fraud Victim Protection
Previously, reimbursement for APP fraud was governed by a voluntary code, leading to inconsistent application across banks. The PSR’s latest policy is a game-changer. It not only sets a maximum reimbursement level per claim at £415,000 but also introduces a nominal claim excess capped at £100. This aligns with the Financial Ombudsman Service’s (FOS) maximum compensation limit, marking a decisive move towards fairer and more uniform fraud refund practices.
The PSR is not just focusing on reimbursements but also on bolstering efforts to prevent authorised push payment fraud. A notable feature of the new regulation is the shared responsibility in reimbursement costs, split 50/50 between the sending and receiving financial firms. For the first time, this policy introduces a direct incentive for the receiving firms to actively engage in fraud prevention measures.
Safeguarding Consumer Interests
Advocacy groups like Which? have long campaigned for mandatory scam reimbursement systems. While the new rules are a positive development, concerns remain. A potential £100 excess could exclude lower-value frauds from reimbursement unless the victim is vulnerable. This loophole might inadvertently encourage fraudsters to target smaller-value transactions.
While the new rules provide a safety net, consumers are advised to remain vigilant in their transactions. Banks, on the other hand, will face stringent requirements to prove gross negligence by the customer before denying reimbursement. This sets a high bar, ensuring that most fraud victims, especially the vulnerable, are adequately protected.
Industry Readiness and Global Leadership
Chris Hemsley, the managing director of PSR, highlighted that these measures place the UK at the forefront of global APP fraud protections. The industry is expected to ramp up its fraud control mechanisms, leading to more consumers receiving fraud refunds. The PSR is committed to working closely with Pay.UK and payment firms to ensure seamless implementation of these protections.
The PSR has released legal instruments mandating payment processor Pay.UK and all firms using the Faster Payments Scheme (FPS) to comply with these requirements. Although the PSR cannot directly incentivise fraud origination prevention in social media and telecom firms, it acknowledges its role in combatting APP fraud.
Collaboration and Ongoing Efforts
Pay.UK welcomes the new regime and is geared up for its implementation. Similarly, Emma Lovell, CEO of the Lending Standards Board, emphasises the continued importance of proactive fraud prevention. The existing Contingent Reimbursement Model (CRM) code already mandates firms to prevent APP fraud, underscoring the need for ongoing vigilance even after the introduction of mandatory reimbursements.
The PSR’s new rules represent a significant advance in protecting UK consumers from APP fraud. By balancing reimbursement with preventive measures, these changes offer relief to fraud victims and propel the industry towards more robust fraud prevention strategies. The collective efforts of regulators, banks, and consumers are crucial in this ongoing battle against fraud. Remember, reporting fraud and staying informed are key to safeguarding your financial well-being.
Balancing Relief with Responsibility
The introduction of this policy is a crucial milestone, offering considerable relief to countless APP fraud victims in the UK. Ingeniously, it brings both the sending and receiving banks under the same umbrella of accountability. This equal responsibility ensures that both parties have a strong incentive to safeguard their customers, as neither will want to incur the financial burden of a refund.
However, there’s a potential downside to consider. As securing refunds becomes more straightforward, there could be an unintended increase in cases of APP fraud. Previously, individuals exercised caution and thorough checks before transferring money. The assurance of a refund might lead to a more relaxed attitude towards these transactions. It’s essential to strike a balance between providing necessary relief and maintaining vigilance in financial dealings.
