Fraud Protection: UK Mandatory Reimbursement Regime for Authorised Push Payment Becomes Effective!

Starting October 7, 2024, the UK will implement a groundbreaking mandatory reimbursement regime to protect victims of Authorised Push Payment (APP) fraud. This system requires Payment Service Providers (PSPs) to reimburse eligible victims within five business days of a claim, with costs split equally between sending and receiving PSPs. Introduced by the UK Payment Systems Regulator (PSR) and the Bank of England, aims to protect consumers, microenterprises, and small charities from financial losses due to APP fraud scams23.

Key Features of the Mandatory Reimbursement Regime

The mandatory reimbursement regime for Authorised Push Payment (APP) fraud in the UK is set to become effective on October 7, 2024, and covers individuals, microenterprises, and small charities, applying to payments made through the Faster Payments Scheme and retail CHAPS. With a maximum reimbursement of £85,000 per claim, this initiative aims to significantly reduce financial losses from APP fraud while encouraging both consumers and PSPs to take proactive measures against scams.

1. Scope and Eligibility
   • Applies to payments made through the Faster Payments Scheme (FPS) and retail CHAPS13
   • Covers individuals, microenterprises, and small charities2
   • Applies to APP fraud payments executed from October 7, 2024 onwards1
2. Reimbursement Process
   • Victims must be reimbursed within five business days of making a claim13
   • The cost is split 50/50 between sending and receiving Payment Service Providers (PSPs)3
   • Claims must be made within 13 months of the last related payment13
3. Reimbursement Limits
   • No minimum claim amount3
   • Maximum reimbursement of £85,000 per claim (currently under consultation, reduced from the initially proposed £415,000)23
   • Optional voluntary excess of £1003
4. Exceptions
   • Reimbursement is not required if the victim has acted fraudulently or with gross negligence2
   • Special provisions exist for vulnerable consumers, who are exempt from the standard of caution and not subject to the excess3

Implementation and Compliance

• PSPs must register with Pay.UK to be onboarded to the new reimbursement system3
• Pay.UK is responsible for monitoring compliance with the reimbursement rules3
• PSPs are required to comply with data reporting standards3

Consumer Responsibilities

The PSR has established a “consumer standard of caution” which includes requirements for consumers to

2:

• Have regard to interventions made by their PSP or competent authorities
• Report suspected APP scams promptly
• Share information with their PSP to help assess reimbursement claims
• Consent to police reporting upon request by their PSP

Impact and Expectations

This mandatory regime replaces the previous voluntary Contingent Reimbursement Model Code, which only covered about 60% of APP fraud losses

2. The new system aims to provide more comprehensive protection for consumers and promote accountability among PSPs. However, the PSR acknowledges that the October 2024 implementation date is “ambitious but feasible” and may be challenging for some PSPs4.In summary, the UK’s mandatory reimbursement regime for APP fraud represents a significant step in consumer protection, placing greater responsibility on PSPs to reimburse victims of fraud while also encouraging consumers to exercise caution in their financial transactions.