New UK APP fraud rules – PSR consults on a lower cap of £85,000 for the maximum level of reimbursement for APP fraud claims

Following on from our previous article on the mandatory reimbursement framework for victims of authorised push payment fraud (APP) (see here), the Payment Systems Regulator (PSR)  announced on 4 September that they are now consulting on a new cap for the maximum level of reimbursement for victims of APP fraud.

Specifically, following additional evidence provided by the industry and the FCA, the PSR have now proposed that the maximum liability amount is set at £85,000. If confirmed, this would bring the cap in line with the Financial Services Compensation Scheme (FSCS) limit. This represents a significant change in the proposed cap amount as the previous maximum reimbursement value had been set at £415,000, in line with the Financial Ombudsman maximum reimbursement limit at that time.

According to the information seen by the PSR, the newly proposed cap will still see over 99% of claims (by volume) covered as the PSR have produced evidence showing that in 2023, out of over 250,000 cases of APP fraud, there were only 18 instances of people being scammed for amounts exceeding £415,000, and 411 instances for amounts of more than £85,000. Moreover, most high value scams appear to be made up of multiple smaller transactions, thus reducing, in the PSR’s view, the effectiveness of transaction limits as a tool to manage fraud exposure.

The PSR’s consultation (see here) on this proposed change to the maximum level of reimbursement closes on 18 September 2024 and the PSR have separately committed that they will keep the new lower cap (if implemented) under consideration through their post-implementation review. The regulator also confirmed that the remaining requirements under the APP fraud reimbursement framework for participants to the Faster Payments System (FPS) will still come into effect from 7 October 2024.

Our Payment Services Regulatory team will be monitoring next steps and shall keep you up-to-speed with the latest developments on the mandatory reimbursement framework.