On 7 October 2024, the new mandatory reimbursement rules introduced by the Payment Systems Regulator (PSR) will come into effect, providing new obligations on payment service providers (PSPs) that are participants in the Faster Payments Scheme to reimburse in-scope customers who are victims of APP fraud (the APP Fraud Reimbursement Rules). The PSR has, to date, rejected industry calls to delay the implementation of the new rules but are consulting on lowering the maximum reimbursement value.
It is hoped that these new rules will work to improve fraud prevention and increase focus on customer protection.
Overview of the new rules
The final APP Fraud Reimbursement Rules, as set out by the PSR in its December 2023 policy statement (PS23/4), will apply to Faster Payments participants through the introduction of three legal instruments (the PSR Specific Requirement 1, PSR Specific Direction 19, and PSR Specific Direction 20) and are due to come into force on 7 October 2024. At a high level, the rules include:
- sending PSPs will be required to reimburse in-scope customers who are victim to an APP scam, unless an exemption applies. It is the maximum reimbursement figure that is currently under review;
- claims for reimbursement must be brought within 13 months after the last payment of the APP scam claim;
- the sending PSP may apply a levy of up to £100 excess per claim;
- the sending PSP may share the reimbursement costs with the receiving PSP on a 50-50 split. However, if the sending PSP does not apply a levy, or applies a partial levy, it may not claim the amount not levied from the receiving PSP; and
- sending PSPs must notify the receiving PSPs of APP scams within a specific timeframe.
Payment Systems Regulatory (PSR) Consultation
On 4 September 2024, the PSR published its consultation paper (CP24/11) on reducing the proposed maximum reimbursement value under the APP Fraud Reimbursement Rules from £415,000 down to £85,000. The originally proposed maximum reimbursement figure of £415,000 was suggested in line with the maximum compensation that could be awarded by the Financial Ombudsman Service at the time of the policy statement. However, the PSR has decided to consult on lowering the maximum reimbursement value due to feedback it received regarding the potential impact and risk associated with the reimbursement level on smaller firms in the market.
The consultation paper closes at 1pm on Wednesday 18 September 2024, and the PSR is aiming to publish the outcome of the consultation at the end of September.
Please get in touch if you would like to discuss how these rules might apply to your business going forward.