UK Payments Regulator Consults on Reducing Maximum Level of Reimbursement for APP Scams

Following feedback from industry and other stakeholders, the Payments Systems Regulator published a consultation paper on reducing the maximum level of reimbursement for the Faster Payments APP fraud reimbursement limit from £415,000 to £85,000. The APP reimbursement requirement obliges payment services providers to reimburse consumers when a payment is executed over the Faster Payments Scheme and the payment was executed following fraud or dishonesty. The PSR proposes to implement the policy with an initial maximum level of reimbursement set at the Financial Services Compensation Scheme reimbursement limit, which is currently £85,000, per each Faster Payments APP scam claim. The previous maximum reimbursement value of £415,000 matched the Financial Ombudsman Service maximum reimbursement limit at that time (the FOS has since raised it to £430,000). The new reimbursement level would come into effect on October 7, 2024 as planned. No other changes to the reimbursement rules are proposed at this stage.

The proposal follows feedback the PSR received from some stakeholders about the risks and impact of the maximum level of reimbursement, in particular prudential concerns for some smaller firms in the market. Under the new proposed limit 99.8% of all APP scam cases would still fall below the limit, and around 90% of total APP scams value would be reimbursed. However, the PSR notes that reducing the maximum level of reimbursement is likely to increase the number of complaints to the FOS as consumers seek to recover the full extent of their losses above the new £85,000 level.

Going forward, the limit will change to track any revisions to the FSCS limit. The PSR will also review the effectiveness and impact of the FSCS limit being the maximum level of reimbursement after the policy has been in place for 12 months.

The deadline for comments is September 18, 2024. Acknowledging the relatively tight timeframe between the publication of the consultation and the date it closes, the PSR is open to considering requests to discuss views on the proposal in lieu of submitting a written response. By the end of September, the PSR intends to publish a policy statement that will contain its decision on the implementation approach for the maximum level of reimbursement for the Faster Payments APP scams reimbursement requirement, ahead of the policy start date of October 7, 2024.

In addition, the PSR also confirmed that the BoE, as the operator of CHAPS, has decided to adjust the maximum reimbursement level for CHAPS, which currently sits at £415,000, to £85,000 to align it with the proposed limit for Faster Payments, if that is the position the PSR adopts for Faster Payments after consultation.

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