Banks’ customers will have greater protections from APP scams under proposals

Banks and building societies will have stronger incentives to prevent scams happening in the first place, as well as having to reimburse victims who have been tricked into transferring money to a fraudster, under a regulator’s proposals.

The Payment Systems Regulator (PSR) has published a consultation to usher in greater consumer protections from authorised push payment (APP) scam losses.

Kate Fitzgerald, interim head of policy at the PSR, told the PA news agency that the plans would ensure a more consistent approach for customers, “levelling the playing field”.

Under the proposals, both the sending and receiving banks will bear the responsibility for allowing fraudulent payments, further incentivising banks who have accounts held by fraudsters to act.

The Government has previously said that the PSR will be able to require banks to reimburse APP scam losses under measures in the Financial Services and Markets Bill.

Many banks have already signed up to a voluntary industry code, however there have been concerns that it has not been applied consistently and the level of protection people are getting from scams depends on who they bank with.

Some providers also operate their own fraud guarantees, leading commentators to suggest that people face a “lottery” as to whether they will get their money back.

TSB has offered a fraud refund guarantee since 2019, while since 2021, Nationwide Building Society has provided a scam checker service (SCS).

The regulator is now consulting on specific proposals that would put that mandatory reimbursement in place for all online and mobile payments. Reimbursement would be on all payments over £100 and subject to an excess of no more than £35.

This consultation will also ensure the PSR can make the necessary regulatory changes as soon as the law has been changed which will allow it to act on APP scams.

The proposed measures include requiring reimbursement in all but exceptional cases, so more victims will get their money back.

The regulator said it wants to see the requirements for mandatory reimbursement in place for consumers as soon as possible.

It said consumers still need to take caution when sending payments and shifts in the way industry carries out fraud prevention will also mean consumers see their account providers stepping in more regularly to prevent fraud, as is seen with card payments.

The regulator is working with Pay.UK – the operator of the Faster Payments system – and the industry to make sure its requirements can be implemented quickly after legislation is passed.

In the meantime, banks and building societies should continue to develop their fraud detection and prevention arrangements to respond to the ongoing risk of fraud to their customers, the regulator said.

Some £583.2 million was stolen through APP fraud last year, according to UK Finance figures.

This was a 39% increase compared with £420.7 million-worth of APP losses recorded in 2020.

Chris Hemsley, managing director at the PSR, said: “Fraudsters have continued to devastate the lives of innocent victims through APP scams.

“We want to see all banks, building societies and other payment providers doing more to prevent APP scams from occurring in the first place. These proposals will mean everyone has more protection from scams.

“We’ve seen progress over the last few years. Some firms have even gone much further with fraud guarantees, so we know people can be protected effectively. Our proposed rules will see everyone benefitting from strong protections, regardless of who they bank with.”

The PSR is also leading on a wider set of changes that would lead to the publication of data on how well firms are protecting customers from summer 2023.

It said it is also supporting and encouraging improved intelligence sharing to spot fraudulent transactions and stop them from happening.

The consultation closes on November 25.

Rocio Concha, Which? director of policy and advocacy, said: “This plan from the PSR is a hugely positive step and could be a game changer for scam victims, ending the reimbursement lottery and ensuring the overwhelming majority get their money back swiftly when they are targeted by APP fraudsters.

“The regulator must ensure fraud victims receive treatment that is fair and consistent, and hold banks to account with strong enforcement measures if they are falling short.”

Paul Davis, director of fraud prevention at TSB, said: “TSB has consistently made the case that all banks should take our approach and provide refunds to customers.

“Having offered our unique fraud refund guarantee for over three years our experience is that it does not cause consumers to take any greater risks and that the proposals outlined by the PSR are likely to deliver far greater protection for victims of fraud, benefiting large numbers of people.”