This post was co-authored by Mark Gwilt and Caroline Brown
The Payment Systems Regulator (the PSR) has published a further consultation on its proposals for addressing the significant problem of Authorised Push Payment Fraud (APP Fraud). This follows the PSR’s November 2021 consultation, which considered measures including reimbursement of victims; publication of scam data; and intelligence sharing. APP fraud, by which a victim is tricked into sending a payment to an account controlled by a fraudster, has increased significantly in recent years. 2021 saw losses of £583.2m – an increase of almost 40% on the previous year. Frequently involving social engineering, APP fraud can have a huge impact on victims – as seen in the case of Philipp v Barclays Bank UK Plc, on which we reported here.
The PSR is considering mandatory reimbursement for consumers, charities and micro-enterprises who fall victim to APP Fraud when using the Faster Payments System and incur losses over a proposed minimum threshold of £100. A proposed “excess” of £35 may apply, and Payment Service Providers (PSPs) would be obliged to allow a minimum of 13 months for a claim to be brought. Only in exceptional circumstances, such as where the customer perpetuated the fraud or where they acted with gross negligence, would a PSP be excused from reimbursement. The PSR proposes that the costs of reimbursement be split 50:50 between the sending and receiving PSPs, though this can be negotiated.
Given the limited scope for exclusions to mandatory reimbursement, the intention is to incentivise PSPs to police their systems and have robust protocols in place to detect and prevent APP Fraud. PSPs may also need to invest in effective investigation tools to streamline the volume of anticipated claims. That may include dealing with case-specific considerations of what ‘gross negligence’ (which is not clearly defined in English law) may be in any particular scenario; and negotiations between sending and receiving PSPs as to allocation of reimbursement costs.
The consultation on APP Fraud reimbursement will close on 25 November 2022.
Fraud is the largest contributor to crime in the UK, and authorised push payment (APP) scams continue to have a devastating impact on people who fall victim. The PSR is going further in fighting fraud, by setting out proposals around mandatory reimbursement for victims.