Banks will be required to reimburse fraud victims who have been tricked into sending money to scammers under rules to come into force next year, a regulator has confirmed.
The requirements for banks and other payment companies unveiled by the Payments Systems Regulator (PSR) are designed to ensure more consumers will get a refund if they fall victim to the phenomenon, known as authorised push payment fraud.
APP scams happen when someone is tricked into making a payment to criminals posing as a legitimate organisation such as a bank, HM Revenue and Customs or the police. Scammers may also pretend to be selling goods or services that do not exist.
Losses from APP fraud reached almost £500m over the last year, according to the latest figures from UK Finance.
The PSR said the new mandatory reimbursement system to launch next year would improve fraud prevention and focus all firms on protecting consumers, with “more people than ever before” getting their money back after the changes.
There will also be new rules around Faster Payments, the bank account transfer system across which most APP fraud currently takes place.
Under the requirements, the costs of reimbursement will be split 50:50 between the firm behind the customer’s account sending the funds and the company running the one receiving them, according to the PSR policy document published on Wednesday.
Customers will be protected by consistent minimum standards, with most APP fraud victims being reimbursed within five business days and additional protections offered for vulnerable people.
The industry will have clearer guidance to follow, including around the ability to apply a claim excess and maximum level of reimbursement, which the PSR will consult on later this year.
Payment service providers within the scope of the new policy will include high street banks and building societies as well as smaller payment firms.
The new requirement will not apply to civil disputes, cash sent via other payment systems or international payments.
The financial services and markets bill, which is making its way through parliament, will allow the PSR to direct firms to refund customers. The bill is expected to pass this year with the new regulations beginning in 2024.
The regulator said it accepts that a customer standard of caution will be required to ensure people take appropriate care when making payments.
Chris Hemsley, managing director at the PSR, said: “Once implemented, our changes will deliver a major shift from the status quo, giving everyone across the payments ecosystem a reason to act to prevent fraud from happening in the first place.
“That means everybody who makes payments can do so with much greater confidence, knowing that they will be better protected against fraudsters.
“In delivering this step-change, the UK will be at the forefront of the fight against APP fraud globally. And by confirming these changes now, it means we will be ready to act once new laws come into effect.”
