The Payment System Regulatory (PSR) has confirmed new rules that will force banks and payment companies to reimburse victims of authorised push payment (APP) fraud.
Following consultation, the regulator has set out how mandatory reimbursement will work in practice. It said the new rules will prompt a “step change” in how firms approach fraud prevention.
“This significant new level of protection is a world first in the battle against APP fraud,” the regulator said.
APP fraud reached £485.2m in 2021. APP fraud is when a customer is tricked into authorising a payment to an account controlled by a criminal.
The rules will focus on Faster Payments, where the majority of APP fraud takes place. The cost of reimbursement will be split equally between sender and receiver, incentivising both to take preventative action.
The PSR said most APP fraud victims will be reimbursed within five business days. Following consultation later this year, limits will be set on the maximum level of reimbursement.
Chris Hemsley, managing director at the PSR, said: “In delivering this step-change, the UK will be at the forefront of the fight against APP fraud globally.”
“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,” Hemsley said.
The regulator hopes to publish final legal instruments and consult on the maximum level of reimbursement by the end of the year. The rules will come into force next year.
City minister Andrew Griffith, said:“As payment scams become ever more sophisticated, it is right that the Government, the regulator and industry work together to ensure victims are not left out-of-pocket by fraudsters.
A spokesperson from Pay.UK, Britain’s interbank payments standards body, said they were “pleased” with the proposals.
“As the independent rules and standards setter for FPS (Faster Payments), we will ensure that our payment system rules reflect the PSR’s new requirements and work in concert with the overall obligation that the PSR is placing on banks and building societies,” they continued.
Paul Davis, director of fraud prevention at TSB welcomed the new rule, saying they needed to be “introduced swiftly”.
But Davis said there was more that needed to be done to combat fraud beyond the financial sector, in particular he highlighted the role of big tech companies.
“Social media companies and telephone firms also have a huge role to play – and must work tirelessly to bring down the excessive levels of fraud enabled through their platforms,” Davis said.
The PSR’s proposals come as concern grows around the scale of fraud. According to figures from UK Finance, over £1.2bn was stolen by scammers last year making the UK the “fraud capital of the world”.