PSR issues new consultation to enable mandatory reimbursement for APP fraud victims

The PSR has opened a consultation on a proposed specific direction under which firms will be required to follow new rules and reimburse victims of APP (authorised push payment) fraud. 

The specific direction, which replaces a draft general direction initially proposed by the PSR in July, is the third of three "legal means" being deployed by the regulator to facilitate mandatory reimbursement for victims. To recap, under the reimbursement requirement:

Any reimbursable APP scam payment reported by a victim to their sending PSP must be reimbursed to the victim by the sending PSP in full, subject to the requirements set out in the reimbursement rules.

The proposed direction is aimed squarely at payment service providers who provide a payment accounts in the UK which can send or receive Faster Payments. It follows on the heels of the two draft legal instruments for the Faster Payments operator (Pay.UK) consulted on in July. In summary, the new direction sets out the:

• reimbursement requirement and its scope (it is worth noting that the limitations to reimbursement - in particular, around the consumer standard of caution exemption, maximum limits and time limits - will now be embedded within the reimbursement rules);
• obligation on firms to follow the reimbursement rules;
• obligation on firms to report APP fraud data to Pay.UK;
• ongoing obligation on indirect access providers to inform the PSR of any payment firms they provide indirect access to.

The consultation closes on 19 October 2023, with the PSR aiming to publish all three legal instruments by the end of 2023. The PSR is currently looking towards 7 October 2024 as the implementation date of the reimbursement requirement.

Separately, the consultation paper also nods its head to the Bank of England's suggestion that a similar reimbursement requirement be imposed for CHAPS. The PSR is working closely with the Bank, and may end up issuing a similar direction for direct and indirect CHAPS participants (with the Bank preparing the relevant scheme rules for CHAPS in parallel).