New UK APP fraud rules – latest developments

1. The PSR confirms a lower cap of £85,000 for the maximum level of reimbursement for APP fraud claims; and 
2. The PSR published its policy statement and Specific Direction 21, expanding APP scam reimbursement protections to consumers of CHAPS.

1. The PSR confirms a lower cap of £85,000 for the maximum level of reimbursement for APP fraud claims

Following on from our previous article on the mandatory reimbursement framework for victims of authorised push payment fraud (APP) (see here), the Payment Systems Regulator (PSR)  confirmed on 25 September the new cap for the maximum level of reimbursement for victims of APP fraud.

Specifically, following additional evidence provided by the industry and the FCA, the PSR have now set the maximum liability amount at £85,000. This now brings the cap in line with the Financial Services Compensation Scheme (FSCS) limit. This represents a significant change in the proposed cap amount as the previous maximum reimbursement value had been set at £415,000, in line with the Financial Ombudsman maximum reimbursement limit at that time.

According to the PSR, the newly proposed cap will provide ‘world-leading protections’ to people who fall victim to scams by seeing over 99% of claims (by volume) covered under the new cap. The PSR also expects that the newly proposed cap will incentivise PSPs to make improvements to their fraud prevention controls and mechanisms.

The PSR have noted that they will keep the new lower cap under consideration through their post-implementation review. 

2. The PSR published its policy statement and Specific Direction 21, expanding APP scam reimbursement protections to consumers of CHAPS

On a separate note, earlier in September, the PSR published their policy statement and Specific Direction 21 (SD 21), expanding APP scam reimbursement to consumers of CHAPS. The proposed APP fraud rules and SD 21 have been aligned with the PSR’s approach outlined previously in connection with the APP fraud reimbursement framework for participants to the Faster Payments System (FPS). Key features of the new rules include the following:

• The policy start date of 7 October 2024 will be aligned with the date that the FPS reimbursement policy enters into force in an attempt to reduce the risk of fraud migrating from FPS to CHAPS;
  
• The Bank of England (BoE), as the responsible operator of the CHAPS scheme, has decided that the maximum reimbursement limit for participants to the CHAPS scheme will be £85,000 (same as for FPS participants). The Bank will keep this cap under consideration and has committed to review this limit within twelve (12) months.
  
• In-scope PSPs are required to register in line with the requirements set out in the CHAPS reimbursement rules and by no later than 7 October 2024. To avoid dual registration, it is noted that this requirement only applies to PSPs who are not already required to register with Pay.UK under the rules on the FPS APP fraud reimbursement framework. 
  
• In-scope PSPs would be required to report the compliance and monitoring metrics to the Bank of England (BoE) on a monthly basis and this information may also be shared with the PSR so that the regulator can monitor compliance with SD 21.

Our Payment Services Regulatory team will be monitoring next steps and shall keep you up-to-speed with the latest developments on the mandatory reimbursement framework.