Jurisdiction(s):
United Kingdom

UK APP fraud reimbursement regime: payment providers’ liabilities, gross negligence defence, £85k cap with ombudsman exposure approaching £945k, 50:50 split and compliance risks after PSR rules take effect

Published on: 08 October 2024

Published by an LexisNexis Financial Services expert

Legal News

Article summary

From 7 October 2024, UK payment firms moved under a fresh regime that compels them to reimburse fraud victims. For consumers, it feels reassuring, but it also marks a material shift in responsibility for providers. It sounds like a tidy fix for customers fatigued by relentless would‑be scammers, yet what liability do banks and payment companies actually bear? In brief, they must repay the great bulk of people duped into transferring funds to criminals via Authorised Push Payment (APP) scams. In practice, that covers most instances where a person is coaxed into authorising a transfer to a fraudster. Banks and payment providers secured a notable win only weeks ago, persuading the Payment Systems Regulator (PSR) to cut the maximum reimbursement from £415,000. Under the PSR’s final framework, APP fraud victims can claim up to £85,000. The payer’s provider, which sent the funds, and the recipient’s provider, which received them, must divide the refund 50:50. Although the lower cap should limit payments firms’ exposure, risks persist even so. A wrinkle in the rules means a victim could still obtain a refund approaching £1m, and firms’ preparedness and capacity to execute reimbursements create further uncertainty.

Negligence defence

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