UK to make APP fraud reimbursement mandatory for scam victims

UK payments regulator wants to reduce the huge sums of money lost to authorised push payment fraud and is calling on the banking and tech industries to play their part. The regulator wants to see APP scams figures published by UK banks, according to the press release.

The Payment Systems Regulator (PSR) sets out its latest plans to fight fraud and protect victims of APP scams.

Every year thousands of individuals and businesses fall victim to Authorised Push Payment (APP) scams – where they are tricked into sending money to an account controlled by a fraudster. There are also a significant number of accidentally misdirected payments that are not recovered. The latest figures show that in the first half of 2021, £355 million was lost to APP scams, overtaking card fraud losses.

The PSR expects to see more action from financial institutions to stop these scams from happening and to better protect people if they do fall victim. In its latest consultation, the PSR sets out the next steps.  

The next steps 

More action must be taken by the financial sector, and by those across the digital ecosystem, including social media firms, to prevent scams and to protect the victims of crime. The PSR’s latest consultation sets out the regulator’s proposals including: 

Publication of fraud data by banks: Banks and building societies in the 12 largest banking groups in Great Britain and two largest banks in Northern Ireland outside those banking groups must publish data on their performance in relation to APP scams, on reimbursement levels for victims, and which banks and building societies’ accounts are being used to receive the fraudulent funds; and 

Improve scam prevention: Industry will improve intelligence sharing to enhance detection and prevention of APP scams.  

Reimbursing victims: Developing how best to make reimbursement mandatory to victims of APP scams once legislative changes have been made. 

The PSR intends to require the publication of fraud data and is keen to work with firms to identify the most appropriate ways this will be collected before the requirement comes into effect.   

In further steps announced by HM Treasury, legislative changes will be made by the Government to provide for mandatory reimbursement for scam victims. Today’s consultation sets out further details about how that can be achieved when legislation is amended.  

John Glen, Economic Secretary to the Treasury said of the government’s plans:  

“Push payment fraud is posing an escalating risk to UK customers, with increasingly sophisticated scams that can be detrimental to people’s lives. The Government’s position is that liability and reimbursement requirements on firms need to be clear so that customers are suitably protected. It is welcome that the Payment Systems Regulator is consulting on measures to that end, and to help prevent these scams from happening in the first place. The Government will also legislate to address any barriers to regulatory action at the earliest opportunity.” 

Chris Hemsley, Managing Director of the PSR says: 

“The growing problem of APP scams has seen people lose devastating amounts of money. More needs to be done and while voluntary industry measures have helped some victims, there are many institutions which have yet to step up to the mark and protect people properly – including social media firms.  

“The range of steps we plan to take will show people which banks and building societies are likely to respond to frauds in the right way and will put the onus on financial institutions to get better at detecting and preventing scams.  

“We are also setting out the way to make reimbursement mandatory for those blameless victims so that, when the law is changed, we are ready to act as quickly as possible to get protections to the people who need them.” 

The PSR’s latest consultation is open until 14 January 2022 and the regulator is keen to hear the views of anyone who has feedback on its proposals.