APP fraud victims to be reimbursed within five days under new rules

APP fraud has rapidly emerged as a major form of fraudulent activity, posing substantial threats both within the UK and internationally. Its detrimental consequences continue to wreak havoc on numerous lives, resulting in losses of nearly £500 million in the past year alone according to the latest UK Finance figures.

The PSR is committed to safeguarding individuals during payment transactions and has now outlined a practical framework for mandatory reimbursement.

Several key changes will be implemented within the Faster Payments system, which underpins open banking services and will empower Pay.UK to combat fraudulent activities more effectively:

• The PSR will introduce new rules in the Faster Payments system to strengthen Pay.UK's ability to combat APP fraud.
• Both sending and receiving payment firms will share the costs of reimbursement equally, incentivizing them to take action against fraud.
• Customers will benefit from consistent minimum standards, with the majority of APP fraud victims receiving reimbursement within five business days. Additional protections will be provided for vulnerable customers.
• The PSR will provide clearer guidance to the industry, including information on applying claim excess and determining the maximum level of reimbursement. Consultation on these matters will occur later this year.
• The Financial Services and Markets Bill, currently progressing through Parliament, will remove existing barriers and enable the PSR to direct firms to reimburse customers. Expected to receive Royal Assent in 2023, the bill will grant the PSR enforcement powers over payment firms.

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.“

While it is undoubtedly positive to have improved assurances regarding reimbursement for individuals falling prey to APP fraud, legal firms should also be capitalising on the advantages of open banking to securely receive payments from their clients.

Simultaneously, they should do what they can to educate their clients about the risks posed by fraudsters during the course of a legal transaction.

Contact us today to learn more about how our team can help you integrate open banking payments into your law firm and help protect your firm and your clients from fraud.