Authorised Push Payment scams reimbursement introduced

Last month new regulatory changes were introduced to help protect consumers, micro-enterprises, and charities from Authorised Push Payment (APP) scams. These updates, introduced by the Payment Systems Regulator (PSR), mark a significant shift in fraud prevention, aiming to reduce the financial impact on victims of APP scams.

What are APP scams?

APP scams occur when victims are deceived into willingly transferring money to fraudsters who pose as legitimate recipients. A scammer might impersonate a trusted organisation, a family member or a close friend to manipulate the victim into transferring funds. APP scams also involve fraudsters pretending to offer genuine goods, services, or high returns on investments.

Unlike other fraud types, where criminals steal money directly from accounts, APP scams exploit trust to convince victims to voluntarily transfer funds to the scammer’s account.

What are the new regulations, and how do they impact you?

The new APP scam regulations took effect on October 7, and they require UK payment service providers to reimburse eligible customers who fall victim to APP scams, provided the transaction was made using the Faster Payments System (FPS) or Clearing House Automated Payment Scheme (CHAPS). However, some limitations and exceptions do apply.

If you are a consumer, micro-enterprise, or charity, you may now be able to request reimbursement if you are the victim of an APP scam.

The cap on reimbursement: a controversial change

While the Payment Systems Regulator (PSR) is introducing mandatory reimbursement, a cap has been placed on the reimbursement scheme. Initially set at £415,000, this cap has been reduced to £85,000, a decision made after careful consideration and feedback. The PSR has stated that over 99% of APP fraud claims should still be covered by this limit.

However, the Chartered Trading Standards Institute (CTSI) has voiced concerns that the reduction may disadvantage victims of high-value scams, such as investment and property fraud. With APP scams estimated to cost UK consumers between £5-10 billion annually, the CTSI fears this reduced cap may leave victims with substantial losses. In cases where a bank denies reimbursement, victims can seek redress through the Financial Ombudsman Service (FOS), but this process can add further strain to those already dealing with the distress of financial loss.

Staying Safe from APP Scams

While the new regulations provide greater protection, prevention remains the best approach to avoid falling victim to APP scams. Following best practice principles can help to keep your finances safe:

• Verify the source: Always double-check the authenticity of any request to transfer money. Contact the organisation or individual yourself using a trusted source, such as their official website or phone number, rather than clicking on a link they have shared.
• Question urgency: Fraudsters often create a sense of urgency to pressure victims. Take time to verify the request before acting.
• Be wary of investment offers: If something sounds too good to be true, it often is. Research any investment opportunities thoroughly and consult with a financial advisor if needed.
• Use strong security measures: Enable two-factor authentication (2FA) on all banking and financial accounts to add an extra layer of security.
• Seek help if needed: If you think you’ve been targeted by a scam, contact your bank immediately. The sooner you act, the better your chances of recovering funds.

By staying vigilant and informed, you can help protect yourself from the rising threat of APP scams and keep your financial information secure.