UK Payment Service Providers Unlikely to Challenge Reimbursement for APP Fraud

Payment service providers are reportedly unlikely to challenge the claims that victims of authorized push payment (APP) fraud make under a soon-to-be-implemented rule in the United Kingdom.

Investigating a case and then challenging it before the Financial Ombudsman Service (FOS) would be too expensive in terms of time and resources, the Financial Times (FT) reported Thursday (Dec. 21).

“My personal view is that for the majority of fraud cases [banks] won’t contest, because the cost of potentially going to the FOS, particularly for small amounts like £1,000 or so, is just not worth it,” Kathryn Westmore, senior research fellow for financial crime at the Royal United Services Institute, told the media outlet.

The U.K.’s Payment Systems Regulator (PSR) announced on Tuesday (Dec. 19) that a new reimbursement requirement will take effect on Oct. 4, 2024, requiring banks and other payment firms to reimburse victims of APP fraud up to 415,000 pounds per incident.

Banks can challenge victims’ claims if the consumer did not take sufficient care when making payments, but they face a “very high bar” in proving that the consumer acted with gross negligence, the PSR said in a Tuesday press release.

The PSR aims to encourage consumers to be careful, while also providing high levels of protection to those who lose money to APP fraud, according to the release. In the 10 months before the new reimbursement requirement takes effect, the regulator will monitor the incidence of APP scams.

“The action we’re taking significantly increases the level of protection for people and puts the U.K. at the forefront of APP fraud protections globally,” Chris Hemsley, managing director at the PSR, said in the release. “Our approach incentivizes banks and other payment firms to prevent APP fraud from happening in the first place while ensuring victims are protected in a consistent way.”

Fraudsters stole more than 1.2 billion pounds (about $1.5 billion) in the U.K. in 2022, according to UK Finance. In addition, the banking and finance sector prevented another $1.5 billion in unauthorized fraud from reaching criminals.

APP fraud losses reached 485.2 million pounds in 2022, UK Finance added in a May 11 press release.