On 28 February 2018, the PSR announced its outcome of the consultation on the introduction of a contingent reimbursement model for victims of Authorised Push Payment (APP) scams.
The paper confirms the steps that will be taken to facilitate the design and implementation of an industry code to protect customers from APP scams. The code will then set out the rules for a contingent reimbursement model.
The Payment Systems Regulator (the PSR) published a report on 7 November 2017 detailing the work it had undertaken in preventing APP scams. The report proposed the introduction of a contingent reimbursement model setting out when a customer would receive their money back from a payment service provider (PSP) where they have fallen victim to a APP scam. The PSR asked for feedback on the proposed model by 12 January 2018.
PSR announcement - 10 key points you need to know
- It was originally proposed that UK Finance should lead the work on the development of the model. However, following the consultation the PSR has agreed the development of the code should be a collaborative process. A steering group will be set up comprising of representatives from across the industry including from consumer actions groups and PSPs. UK Finance will act as the secretariat and Ruth Evans has been appointed as the chair.
The PSR does not consider it necessary to make changes to UK Finance's Best Practice Standards for responding to APP scams. This will be kept under review.
The code is intended to apply to all PSPs (including new entrants following open banking) where they have control over preventing and responding to APP scams. At this stage the PSR has said it does not think it is appropriate to extend the industry code to other parties who are not PSPs as this would add significant complexity to designing the industry code.
The PSR has said it does not consider it necessary at this stage to take regulatory action to ensure PSPs adopt the industry code. The code should represent the agreed industry best practice.
The scope of the model will be limited. Only victims of APP scams that are consumers, micro-enterprises and small charities can seek reimbursement. This reflects the wording of the Payment Services Regulations 2017.
There will not be a separate dispute resolution body or mechanism other than the Financial Ombudsman Service (the FOS) to handle consumer-PSP disputes under the industry code. The PSR does not want to duplicate costs and confuse consumers. The code can be taken into account by the FOS in its relevant considerations from September 2018.
The PSR is leaving it to the industry to agree a dispute mechanism for disputes between PSPs. The PSR has suggested that this could align with the PSP-PSP dispute process under Open Banking. Although the PSR has not said who should take on this role, it has agreed that both it and UK Finance may have difficulty providing this service.
The requisite level of care and standards are not defined by the PSR. The steering group will look at this as one of a number of key issues along with the no blame scenario and inter-PSP blame scenario.
The PSR has proposed that the steering group should have a core set of principles that its proposals for the industry code should be consistent with. The key principles include ensuring there is an incentive for those with the ability to effectively prevent APP scams and reduce their impact as well as also ensuring a consistency of outcomes for victims of APP scams.
- The PSR has set a timetable for an industry code to be provided by September 2018 with a final industry code to be in place in early 2019. Although it notes there is a significant amount of work to be done the PSR considers it important to introduce the industry code as soon as practically possible. The PSR considers a phased implementation is appropriate.
Since the Which? super-complaint in September 2016, the issue of APP fraud has received considerable attention. It has been clear from recent reports and debates that the PSR has been under considerable pressure to implement a reimbursement model and to obligate banks to put in place new technology to help prevent APP scams.
September 2018 is a challenging deadline and the industry will need to work together to support the development of the model.