Getting the right outcomes for the victims of APP fraud

Today, 6 August 2020, the Payments System Regulator (PSR) published a thought piece: Getting the right outcomes for the victims of Authorised Push Payment (APP) scams.

An authorised push payment (APP) scam happens when someone is tricked into sending money to a fraudster. These crimes can have a devastating effect on those who fall victim. At the PSR, we think that someone who loses money as a result of an APP scam, despite taking reasonable care, should get their money back.

Genevieve Marjoribanks,, Head of Policy, PSR

Reimbursing the innocent victims of APP scams is a widely agreed principle of the Contingent Reimbursement Code’s (CRM) signatories and remains a top priority for the PSR. 

In some respects the CRM offers a worthy additional layer of consumer protection and extends the protection offered by card chargebacks and the Direct Debit Guarantee.

However, as the effectiveness of the CRM is reviewed after the first year of operation it is important to consider:

  • a renewed focus on actions that will prevent APP fraud rather than dealing with the consequences of the successful actions of a fraudster.
  • whether a pooled reimbursement pot masks the issue and negates the incentive for a bank to deal with its own fraud profile.
  • whilst mechanisms to financially set the innocent victim right are laudable they do not prevent the stress and mental health consequences of a fraudulent act.
  • whether additional friction in near real time (e.g. Faster Payments) or real time (e.g. CHAPS) is required to provide time to identify potentially fraudulent payments. Perhaps only for payments over a certain limit and a small step (AI / ML based) in the payment timeline.
  • the need for a long term consumer protection solution rather than a short term iterative approach.

Interestingly, the PSR state that only 40% of APP loses are currently reimbursed by the banks – only 40%?

The PSR implies that for a voluntary industry solution to continue it should be made permanent and also they suggest the threat of regulation if the CRM code is deemed to be ineffective.

This thought piece from the PSR is timed well as the Lending Standards Board is currently consulting on how well measures for protecting consumers and refunding the victims of scams are working: consultation document.

Update: New graphic published by the PSR:

Source: PSR

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