PSR publishes two calls for views on APP scams and consumer protection in interbank payments

Hogan Lovells

Hogan Lovells

The PSR is seeking views on potentially far ranging measures which aim to reduce authorised push payment (APP) fraud and improve protection for victims. Alongside this it is looking at increasing consumer protection in interbank payments (i.e. those payments consumers make from their bank account directly to another bank account using e.g. Faster Payments). These protections could include an industry wide reimbursement model similar to that offered to consumers under the credit regime.

The PSR’s two calls for views

APP fraud

The PSR has published a call for views, CP21/3, focussing on authorised push payment (APP) scams.

The PSR explains that, although the Contingent Reimbursement Model (CRM) Code has improved consumer outcomes, its application has not led to the significant reduction in APP fraud losses incurred by customers that is needed. Customers are still bearing a high proportion of losses, despite the default requirement in the Code that customers should be reimbursed where they have acted appropriately.

The PSR proposes three measures which, applied individually or in combination, could help by both reducing APP fraud and, when it happens, improving protection for victims. The measures are:

  • improving transparency on outcomes, by requiring payment service providers (PSPs) to publish their APP fraud, reimbursement and repatriation levels;
  • greater collaboration to share information about suspect transactions, by requiring PSPs to adopt a standardised approach to risk-rating transactions and sharing risk scores with other PSPs involved in a transaction; and
  • introducing mandatory protection of customers, by changing payment system rules so that all PSPs are required to reimburse victims of APP fraud who have acted appropriately.
Potential implications

Whilst the first two measures will require changes to processes and systems, it is the last measure which is particularly striking for PSPs in this space.

The PSR believes PSPs are currently abusing the exceptions process in the CRM to enable them to reject a disproportionate number of claims, many of which are later overturned by the FOS. To ensure all PSPs are caught, it is also calling for the CRM to become mandatory or obligations to refund to be imposed by changes to scheme rules.

Without further input from impacted PSPs, firms could find that their ability to reject claims is hugely, if not entirely, diminished. Firms will need to carefully consider how they respond to the CP to ensure they shape a framework which is both workable and which also does not have huge financial implications on their fraud losses. We would be happy to work with any PSPs who feel it is in their interest to submit a response.


Responses can be submitted on the call for views until 8 April 2021. The PSR plans to publish a follow-up paper to CP21/3 between July and September 2021.

Consumer protection in interbank payments

The PSR has also published a second call for views, CP21/4, focussing on consumer protection in interbank payments. In particular, the PSR considers the levels of protection available to consumers when they make payments from their bank account directly to another bank account using an interbank payment method (particularly the Faster Payments Service).

The PSR explains that more people are transferring money using smartphone apps or online banking. As more transfers are made in this way, the PSR is keen to understand whether the protections currently in place are sufficient. The PSR is exploring how it, and the industry, can ensure that consumers and businesses are not disproportionately harmed when something goes wrong with their interbank payment (including faults with goods or services purchased). The PSR is considering measures that make it easier for consumers to make a claim when something goes wrong, as well as measures that benefit businesses by providing certainty about what happens when a payment is disputed.

Potential implications

Any introduction of a reimbursement model for interbank payments will have huge implications for those involved in the payment chain and lead to a fundamental shift in the way these payment chains operate, as well as the cost of bearing liability when things go wrong.

Early engagement will be key in ensuring the right issues are considered and the PSR has full sight of the potential implications of such a model. Please let us know if you would like to talk through any of the issues this may pose and equally if you would like help in submitting a response to the PSR.


Responses can be made to the call for views until 8 April 2021. The PSR will set out proposed next steps following CP21/4 later in the year.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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