PSR consults on APP fraud reimbursement limit and consumer standard of caution

PSR has launched two consultations relating to the implementation of its new APP fraud reimbursement requirements, which mean that the vast majority of victims will be reimbursed within 5 days of the fraud being reported to their bank.

Maximum level of reimbursement and claim excess consultation

PSR has confirmed that sending banks will have the option to apply a claim excess under the new requirements, except where the consumer is vulnerable. There will be no minimum threshold for excesses, but there will be a maximum limit.

It now seeks views on the most appropriate way of structuring a claim excess, including whether it should be a fixed amount (similar to insurance claims excesses) or a percentage of the reimbursement claim amount, or a percentage up to a cap which would be set regardless of the amount of the reimbursement claim. In initial conversations, it sees the disadvantage of a fixed excess as discouraging lower claim amounts, but the industry has suggested that while proportionate excesses would be easy to implement they would be harder for consumers to understand.

PSR also proposes that the maximum level for reimbursement should be in line with the prevailing FOS limit of £415,000 per claim, which around 98% of APP fraud falls within. It is also consulting on whether the maximum level will apply to vulnerable customers.

Consumer standard of caution consultation

PSR had previously stated that there would be two exceptions to the general reimbursement obligation – where the consumer seeking reimbursement had acted fraudulently, or where they had acted with gross negligence (assessed in line with a “consumer standard of caution”). PSR proposes that the standard of caution should consist of three things:

  • A requirement for consumers to have regard to specific, directed warnings given by their bank, which make clear the intended recipient is likely to be a fraudster. However, banks will have to take into consideration the complexity of the scam, including any social engineering consumers may have faced;
  • A prompt reporting requirement, meaning that a victim of an APP scam should notify their bank promptly and, in any event, not more than 13 months after the last fraudulent payment was made; and
  • An information sharing requirement, where consumers should respond to any reasonable and proportionate requests for information made by their bank to help them assess a reimbursement claim, or to determine if a customer is vulnerable.

If it can be demonstrated that the consumer has been grossly negligent in not meeting one or more of the above, then they may not be reimbursed. However, given the very high bar that gross negligence sets, PSR only expects it to apply in a small minority of cases, and it will never apply where a victim’s vulnerability is a factor in them being defrauded. The consultation includes the draft policy, and draft guidance to PSPs on how to approach assessments under the standard.

The consultations closes on 12 September 2023.

PSR is expected to consult on the draft general direction requiring reimbursement for APP scam victims in October. It will publish the claim excess and maximum level of reimbursement, additional guidance on the consumer standard of caution, and all legal instruments, by the end of 2023.

Laura Wiles