PSR confirms APP fraud reimbursement level to be reduced

The compulsory reimbursement scheme for Authorised Push Payment (APP) fraud will come into effect on 7 October. Following closure of its brief consultation, the Payments Services Regulator (PSR) has confirmed that the maximum reimbursement amount will be set at GBP85,000. This is a significant decrease from GBP415,000 that the PSR had originally proposed could be reimbursed by Payment Service Providers (PSPs) and is now in line with the maximum reimbursement level set by the Financial Services Compensation Scheme (FSCS). This reduction follows pressure from smaller institutions about the negative impact of reimbursing to such a level, which led to a short consultation on the issue by the PSR earlier this month. The PSR reports that it will go ahead with the reduced maximum reimbursement as it estimates that 99% of APP claims will still be covered. The PSR says it will publish a full report to explain its reasoning next week.

How the scheme will apply

The reimbursement scheme will apply to APP fraud which occurs in the Faster Payments System, but it has been confirmed by the Bank of England that the scheme will be replicated for CHAPS payments, with the new maximum level applying there too. If a claim is successful, the reimbursement will be split between the paying bank and the recipient bank. In this context the reduction from GBP415,000 to GBP85,000 will be welcomed by both sending and receiving PSPs.

Will there be a reduction in fraud?

The new scheme has attracted some controversy, with concerns that it will lead to fraudulent reimbursement claims, with fraudsters staging false APP claims. However, the reduction in the level of reimbursement should reduce the attractiveness for fraudsters targeting the scheme. The PSR hopes that the scheme will encourage PSPs to introduce more vigilant fraud detection schemes to avoid reimbursement liabilities.

For further detail on the background to this and the PSRs prior consultation, please see our article and webinar released earlier this year.  

Consultation on delaying payments for up to 4 days

To assist PSPs to investigate suspicious payments, the Treasury is consulting on amendments to the Payment Services Regulations to allow payments to be delayed by up to 4 days if there are suspicions of fraud or dishonesty. The consultation on this change closes on 4 October 2024.