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UK Government to legislate for mandatory reimbursement of APP fraud

UK Government to legislate for mandatory reimbursement of APP fraud

The UK's banks will be required to 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, under new rules proposed by the payment systems watchdog.

The move comes amid rising panic about an epidemic of authorised push payments fraud, in which customers are tricked into revealing security details by scammers posing as authority figures. The latest figues from UK Finance show losses to APP fraud topped card fraud for the first time in H1 2021.

The payments watchdog says it expects to see more action from financial institutions to stop these scams from happening and to better protect people if they do fall victim.

On the latter point, over three quarters of bank customers have failed to win reimbursements from banks after falling victim to APP fraud, despite a voluntary code of practice that promises refunds in 'no blame' cases.

The PSR consultation coincides with proposed legislative changes by the Government to provide for mandatory reimbursement for scam victims.

John Glen, economic secretary to the Treasury says of the government’s plans: “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 that while voluntary industry measures have helped some victims, there are many institutions which have yet to step up to the mark.

“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.

Camapigning consumer group Which? says the proposed measures are huge win for bank customers.

Anabel Hoult, Which? chief executive says: “People are still losing life-changing sums of money every day, so the Treasury must move swiftly towards introducing the necessary legislation. The regulator must also ensure it is ready to put in place mandatory reimbursement rules the moment that legislation is passed, so fraud victims are treated fairly and consistently when trying to get their money back.

“Which? has been calling for banks to come clean on how they treat fraud victims, so it’s positive that the PSR is planning to direct firms to publish data that shows fraud case numbers and how often they reimburse customers. The banks must cooperate fully with putting in place these long overdue requirements.”

Comments: (2)

A Finextra member
A Finextra member 18 November, 2021, 14:541 like 1 like

Will banks have to reimburse people who send money to fraudsters using cash as well? Or Bitcoin? 

D. Scott Andrick
D. Scott Andrick - Pegasystems - Cambridge 18 November, 2021, 15:061 like 1 like

Exactly David, I had the same thought. If I withdrew cash and gave it to someone who turned out to be a fraudster, how is that the banks' job to stop? If they really want to stop this, they would force the RECEIVING bank to return the funds. I'm sure more due diligence/holds/etc would be taken then!