The Payment Systems Regulator (PSR) in the UK has a deadline of 7th October 2024 for the implementation of a new mandatory reimbursement framework for victims of Authorised Push Payment (APP) fraud.
The rules and regulations in this space are extensive, however, some of the key changes and takeaways from the new rules include the following:
- Sending Payment Service Providers (PSPs) will be required to reimburse victims of Authorised Push Payment (APP) scams, except in cases where an exception applies under the consumer standard of caution or if the claim’s time limit has expired. Claims involving multiple payments are only covered if the payments were made after 7 October 2024, the start date for the reimbursement requirement.
- The maximum reimbursement amount is set at £415,000 per claim for all eligible consumers, with no automatic adjustments for inflation or other metrics. However, the PSR may review this limit if high-value APP scams become more prevalent. Sending PSPs may choose to reimburse amounts exceeding this cap, however, there are already indications that this cap may be reduced based on recent industry discussions.
- Sending PSPs can charge an excess fee of up to £100 per claim, with the discretion to charge the full amount, a reduced amount, or none at all. Vulnerable customers are exempt from paying this excess, and any future changes to this value will be reviewed by the PSR. PSPs must develop communication plans for this new protection, in line with the FCA’s Consumer Duty
- A sending PSP may share reimbursement costs with a receiving PSP, with the receiving PSP covering 50% of the claim.
Given the changes noted above, Square 4 is seeing an increasing demand in the marketplace for suitably qualified and mobilised operational interim resources to support existing and forecasted increases in claims.
Specifically, we are seeing increasing demands due to the following knock-on effects from the new rules coming into force in October ‘24. The operational impact we are seeing includes, but is not limited to the following:
- Increasing volumes of calls, queries, and complaints regarding blocked payments: There has been a significant increase in the number of calls, queries, and complaints related to payments that have been blocked due to suspected fraudulent activity. While most of these issues have been effectively resolved through phone conversations, a portion of these cases are being escalated to the complaints team for further handling, particularly when the resolution is more complex or requires additional investigation. This is only expected to increase as the rules become embedded in October.
- Market demand for specialist call agents: Specialist call agents are actively involved in handling cases where customers are attempting to make potentially fraudulent transactions that have been flagged by the system. These agents are trained to engage with customers, advising them against proceeding with these transactions and explaining the risks involved. Their role is crucial in preventing fraud by negotiating with customers to ensure they understand the importance of not authorising suspicious payments and area becoming increasingly in demand.
- Increased support around the repatriation of fraud funds by agents: Dedicated agents are already reviewing older fraud cases with the goal of repatriating funds to customers, particularly in light of new regulations that will come into effect in October. These agents are taking a proactive approach by revisiting cases that may have been closed without any funds being returned to the customer, ensuring that any potential reimbursement under the new rules is addressed.
- Greater time spent handling disputes related to potential scams: There has already been an uptick in disputes where customers have proactively contacted their banks, either by phone or messaging, to report that they believe they have been scammed. These customers often express concerns that the bank should have identified and prevented the fraudulent transaction from going through. These disputes require careful handling, as they involve not only customer service but also a review of the bank’s fraud detection and prevention measures and will likely only increase given the new October deadline.
Square 4 is also seeing (and supporting) several firms making changes to their operating models, in consideration of the following:
- Reviewing of systems, policies, and processes: firms are conducting and in many cases finalising a thorough review of existing systems and processes to ensure full compliance with the new regulations. This review should be undertaken regardless of any current protocols, as the new rules may necessitate significant updates or changes to existing practices. Firms are particularly focussed on policies and procedures related to customer standards of caution, ensuring fair and consistent application of the standards where a firm may be able to defend its position regarding the payment decision and action taken.
- Staff training and awareness: firms are rightly prioritising staff training, particularly in enhancing their ability to identify and support vulnerable consumers. Firms should implement targeted training programs that equip employees with the skills and knowledge to recognise and respond effectively to the specific needs of vulnerable customers, ensuring they receive appropriate protection and support.
Get in Touch
If you would like to find out more about how we can support your operational readiness, be that interim resources to a review of your training approach or your broader policies and procedures, please reach out to one of our team.
Tom Jeffery – Operations Director
Sean Kulan – Client Relationships Director
