Bank transfer scam redress for 2024 confirmed

Plans for vital legal protection against bank transfer fraud have been finalised, following an announcement by the Payment Systems Regulator (PSR) today.

A new authorised push payment (APP) reimbursement scheme will come into force on 7 October 2024 and new rules have been confirmed, including an upper claim limit of £415,000 and a claims excess of £100. 

In October, Which? raised concerns that the PSR risked weakening fraud protections with its latest proposals. Today's announcement is a hugely important milestone protection for consumers, as victims APP fraud should be reimbursed in all but exceptional cases.

The proposed scheme will apply to more than 1,500 firms offering Faster Payments, whereas only 10 banks and one building society are currently signed up to the voluntary CRM Code.

Here we explain what the finalised rules mean for APP fraud victims. 

Consumer standard of caution exception

CONFIRMED: The onus will be on your bank to prove that you acted with gross negligence. The PSR expects only a small minority of cases will be subject to this exception.

Under the voluntary scheme, both banks and customers are expected to meet certain standards of care. For example, banks should provide ‘effective warnings’ (typically, instructions or messages when you set up, change or make payments) while consumers should have a reasonable basis for believing that they are paying a legitimate person or business. 

Earlier this year, Which? criticised the PSR's initial proposals for a consumer standard as it appeared to place the burden more heavily on consumers, with little mention of what will be expected of payment firms. 

A few changes have been made following the announcement today, including a new police reporting requirement and an amendment requiring consumers to pay attention to interventions (not just warnings) by sending payment service providers (PSPs), the police or other relevant authorities. 

This is the final approach to the consumer standard of caution exception:

• The requirement to have regard to interventions: consumers should have regard to interventions made by their sending PSP or by a competent national authority, such as the police. Those interventions must clearly communicate the PSP’s or police assessment of the probability that an intended payment is an APP scam payment.
• The prompt reporting requirement: consumers should, upon learning or suspecting that they have fallen victim to an APP scam, report the matter promptly to their PSP and, in any event, not more than 13 months after the last relevant payment was authorised.
• The information sharing requirement: consumers should respond to any reasonable and proportionate requests for information made by their PSP to help them assess a reimbursement claim. This includes requests under PSR ‘stop the clock’ rules.
• The police reporting requirement: consumers should, after making a reimbursement claim, and upon request by their PSP, consent to the PSP reporting to the police on the consumer’s behalf, or request the consumer directly report the details of an APP scam to a competent national authority.

PSPs can't simply reject claims if you fail to meet one of these standards – they must be able to demonstrate that the failure was as a result of gross negligence and it said 'the burden of proof falls exclusively upon the PSP to demonstrate that a consumer has acted with gross negligence.'

The regulator also clarified that it interprets ‘gross negligence’ to be a higher standard than the standard of negligence under common law so victims need to have shown a significant degree of carelessness. 

Claims excess set at £100

CONFIRMED: sending payment firms can – but do not have to – apply a claim excess of up to £100. There is no claims excess for vulnerable consumers.

Under the voluntary CRM Code, fraud victims are not required to pay any excess when they make a claim for reimbursement. The PSR proposed introducing one to encourage people to be more cautious. 

This started life at ‘no more than £35’ back in September 2022 and a fixed excess as high as £250 was floated when the PSR published proposals in October. 

It has now said that fraud victims may be expected to pay up to £100 towards claims, even though 32% of APP fraud falls below the value of £100. 

Rocio Concha, Which? Director of Policy and Advocacy, said: 'An excess of £100 would mean almost a third of APP scams would not be eligible for reimbursement, unless the victim is vulnerable. The PSR must be prepared to change the level of the excess if, as a result of the decision, fraudsters start to focus their attention on lower-value fraud.'

• Find out more: the impact of fraud on victims’ mental and physical health

PSR confirms U-turn on maximum reimbursement

CONFIRMED: the maximum level of reimbursement will be set at £415,000 per claim, in line with the maximum award the FOS can make when considering complaints.

The regulator has changed its position on the maximum level of reimbursement. It originally had no plans for a claims limit but following industry pressure, there will be a cap on reimbursement for APP fraud claims set at £415,000, matching the Financial Ombudsman Service (FOS) compensation cap. 

Which? has previously pointed out that the FSCS protects temporary high balances of up to £1m for six months (intended to protect customers who have a temporary high balance, such as when selling property, or receiving an inheritance or divorce settlement). We think customers deserve similar levels of protection from APP scams.