A requirement to reimburse

Issue 536 | 2 October 2023

The Payment Systems Regulator (PSR) has published a consultation on a proposed Specific Direction, which will require firms to follow new rules and reimburse victims of authorised push payment (APP) fraud.

This premium subscriber edition of Payments:Unpacked:

• outlines the key points you need to know about the PSR’s proposed Specific Direction

and

• provides a quick summary of the draft APP Reimbursement scheme rules for the Faster Payment Service published by Pay.UK.

---

Specific Direction on Faster Payments participants: Implementing the reimbursement requirement

In June 2023, the Payment Systems Regulator (PSR) published a policy statement outlining a new authorised push payment (APP) fraud reimbursement requirement.

The policy statement set out a path to reducing the impact of this type of fraud – by making sure more victims of fraud get their money back, but also by prompting a step change in fraud prevention. 

The PSR has now published a consultation on a proposed Specific Direction on PSPs who participate in Faster Payments. The Specific Direction will underpin the Faster Payments reimbursement rules. 

This new direction focuses on all payment firms that use FPS and sets out:

• the reimbursement requirement and its scope 

• the obligation on firms to follow the reimbursement rules

• the obligation on firms to report APP fraud data to Pay.UK

• the ongoing obligation on indirect access providers² to inform the PSR of any payment firms they provide indirect access to  

This is one of three proposed legal instruments the payments regulator will use to implement the policy - the other two legal instruments were consulted on in July 2023.

This proposed Specific Direction is relevant to the payments industry, consumer groups, payment service providers, and prospective qualifying customers who use Authorised Push Payments to send money and will be within scope of the policy, once implemented.

This proposed Specific Direction replaces the draft General Direction that the PSR initially proposed. Following feedback the PSR is consulting on a Specific Direction to provide more clarity around which firms are being directed.

The consultation is open until 19 October 2023 and can be downloaded here.

In the lead up to the new implementation date, which will be finalised and set in December, the PSR will publish:

• All legal instruments

• Consumer standard of caution policy and guidance

• Excess and maximum level of reimbursement policy.

---

Specific Direction Consultation: Key points you need to know

There is no substitute to read all 27 pages of the PSR’s consultation but here’s a quick summary of the key points:

• The proposed Specific Direction will apply to all Faster Payment PSP’s who either participate in Faster Payments or provide a payment account in the UK to their payment service users which can send or receive Faster Payments.

• The proposed Specific Direction meets the PSR’s regulatory principles and statutory objectives:

It furthers our commitment to ensure that service users are sufficiently protected when using the UK’s payment systems and, in the longer term, it will promote competition through creating a more efficient payments market based on clearer standards for preventing fraud.

PSR

• There will be a specific requirement on Pay.UK to amend the Faster Payment rules (more below) - the rules will include:

  • the reimbursement requirement and its scope

  • sharing the cost of reimbursement

  • a time limit to reimburse victims

  • the ability to charge a limited claim excess

  • the ability to impose a maximum level of reimbursement

  • a time limit for victims to claim.

• Under a Specific Direction, Pay.UK will be required to monitor PSPs in line with the specific requirement and specific direction. Pay.UK will be required to provide the PSR with compliance data to inform any enforcement the regulator may take and allow them to assess the policy’s effectiveness.