PSR advances fight against APP fraud with new consultations


The Payment Systems Regulator (PSR) is progressing in its fight against APP fraud by introducing two consultations. 

The PSR, earlier in June, defined its definitive stance on APP fraud. The framework ensures that a substantial majority of APP fraud victims will see their funds returned within a mere five days after reporting the fraudulent activity to their bank. This decisive action by the PSR underscores a comprehensive approach to thwart APP fraud from the onset, urging consumers to be vigilant while transacting.

A notable point in the run-up to the implementation next year is the PSR’s plan to gather insights on the peak reimbursement amount, claim excess, and also the standard of caution consumers should exercise.

Diving into the ‘Consumer standard of caution consultation’, the PSR elaborates on the pivotal elements. Firstly, consumers are urged to heed specific alerts by their banks indicating potential fraud. Banks, however, should evaluate the intricate nature of an APP scam, taking into account potential social engineering tactics victims might have encountered.

Secondly, prompt reporting is paramount. Those suspecting or being victims of APP scams should alert their banks within 13 months following the last dubious transaction. Lastly, cooperation between consumers and banks is vital, with consumers needing to provide any pertinent information to their banks when requested, aiding in claim evaluations.

However, a significant caveat is if a consumer can be proven to have exhibited extreme negligence, reimbursement may be denied. Such a circumstance will be determined on a case-by-case basis, with gross negligence anticipated to be a rarity.

Elaborating on the ‘Maximum level of reimbursement and claim excess consultation’, the PSR is inviting opinions on the structure of claim excess, and whether it should be a fixed sum or a fraction of the claim amount. The regulator is also considering capping the maximum reimbursement level to match the current Financial Ombudsman Service limit of £415,000 per claim.

PSR Managing Director Chris Hemsley commented, “The changes we are delivering will bring a major shift in preventing fraud, increasing reimbursement for victims, and incentivising the banks to do more to help their customers. The two aspects we’re consulting on now will help to strike the right balance between encouraging people to be careful when making payments, while ensuring they have confidence in knowing they’ll be better protected if they do fall victim to fraud.”

Consequently, October will witness the PSR’s consultation on the draft direction directed at all payment firms mandating reimbursements for APP scam victims. By the end of 2023, the PSR will unveil the claim excess, maximum reimbursement levels, additional guidance, and all legal instruments, with the new reimbursement norms coming into effect in 2024.

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