APP reimbursement code: How does it work and what could stop me being refunded?

People falling victim to crimes such as purchase scams, romance frauds and investment scams will have the protections of a new reimbursement code from Monday.

Here is a look at how the new code will work:

– What is happening?

A new code will require banks to reimburse people in cases where people have been tricked into sending money to a fraudster via bank transfer.

The code is overseen by the Payment Systems Regulator (PSR).

Under the new code, reimbursement costs will be split between the sending and receiving banks – giving the receiving firm an added incentive to stop the scam happening in the first place.

– Was there already a code in place?

Yes, a previous reimbursement code was launched in 2019, overseen by the Lending Standards Board (LSB). That code, which has been superseded by the new one, was voluntary. The new code is mandatory.

– Who will be protected under the new code?

The PSR says the protections apply to people, microenterprises (employing fewer than 10 people as well as other stipulations) and charities with an annual income of less than £1 million.

– Which types of account providers will have to follow the new code?

Bigger high street banks as well as smaller payment firms, building societies, and e-money firms, among others, have been brought into the new reimbursement arrangements. Credit unions are among those which are not included.

– What sort of payments will have the protection of the code?

The new rules apply to UK bank transfers – when money is moved from one UK bank account to another over the Faster Payments system or Chaps.

Other payment types, such as cards, already have their own protections in place.

– How long will a refund take?

From October 7, people can generally expect to be reimbursed within five business days of making a claim.

Firms can “stop the clock” if they need more time to gather information. But to help prevent delays, firms must arrive at an outcome within 35 business days.

– Is there a limit to the refund I can get?

Under the new protections there is an £85,000 reimbursement limit – but banks can choose to reimburse higher amounts. There is also an optional excess of up to £100 that firms can apply. The excess cannot be applied to vulnerable consumers.

The optional excess means that the firm that has sent the payment may potentially reduce the reimbursement by a maximum of £100. Whether or not someone faces an excess could depend on who they bank with.

– What if the loss is more than £85,000?

The PSR says the new limit will cover more than 99% of claims. Individual firms may choose to reimburse more than £85,000. Where more than £85,000 is lost and not reimbursed, fraud victims could choose to lodge a claim with the Financial Ombudsman Service (FOS), which has a compensation limit of £430,000.

– What could stop me getting a refund?

People will not be refunded if they are found to have been complicit in the fraud or grossly negligent. The PSR says gross negligence is a “high bar” and this exception does not apply to vulnerable consumers.

– What if a fraudster makes a payment without my say-so?

APP fraud is different to unauthorised fraud, when someone may steal your details to make payments without your knowledge or consent.

In unauthorised fraud cases, people are generally entitled to a refund unless they have acted with gross negligence.

–  How can I protect myself from scam payments generally?

Look out for communications and warnings from your bank. Banks often send out app notifications as transactions take place, so look out for anything suspect. Banks should be contacted immediately if a scam payment is suspected. This will help them claw money back and also stop further scam payments leaving your account. The police should also be contacted.

The Take Five to Stop Fraud campaign reminds people to pause and think before making payments. People should be particularly wary when contacted unexpectedly. Criminals are experts at impersonating legitimate organisations and may also claim to be friends or family members in urgent need of cash.

The Confirmation of Payee name-checking service makes sure that the name of the person you think you are paying matches the bank details you have inputted – so if it comes up as a non-match in your banking app, this could be a warning sign that you are about to pay an impersonation scammer. Pay attention to warning messages from your bank.

Many banks have signed up to the 159 service, which helps people get through to their bank on a memorable number if they are concerned about being scammed.