Policy paper

Government approach to authorised push payment scam reimbursement

Published 10 May 2022


1) The government and the Payment Systems Regulator are committed to tackling fraud within payment networks. In recent years, “authorised push payment” (APP) scams, where a payer is deceived or defrauded into authorising a payment to a criminal, have increased both in value and volume, with many individuals suffering significant financial and emotional harm.

2) Since 2016, the Payment Systems Regulator (PSR) and the payments industry have worked together to both prevent payments fraud, and to develop better mechanisms for reimbursing victims of APP scams. This has included introducing the voluntary Contingent Reimbursement Model (CRM) Code (“the Code”), which began operating in 2019. Under the Code, signatory payment service providers voluntarily reimburse APP scam victims. The Code has currently been signed by ten banking groups, and covers 90% of relevant transactions. Further payment service providers have also made independent voluntary commitments to victim reimbursement.

3) The government recognises and welcomes these developments. However, reimbursement to victims of APP scams remains inconsistent, with many victims continuing to suffer losses without reimbursement. This is in part because some firms have not made voluntary commitments to reimburse victims of APP scams, but also because even amongst firms who have made voluntary reimbursement commitments, there are disparities in how firms interpret their obligations.

4) In light of this, the government welcomed both the PSR’s Call for Views on APP Scams, and the subsequent Consultation on Authorised Push Payment (APP) Scams, which proposed introducing mandatory reimbursement for APP scams which occur over Faster Payments, as well as other measures to improve fraud prevention.

Approach to legislation and regulatory action

5) Both the government and the PSR agree on the urgent need to protect victims of APP scams, both by enhancing measures to prevent APP scams, and by implementing mandatory reimbursement in Faster Payments. The PSR has previously stated that it could use its regulatory powers in respect to APP scam reimbursement, if legislative changes were made to the Payment Services Regulations 2017. In November 2021, the Economic Secretary to the Treasury stated that the government would legislate to address any barriers to regulatory action on APP fraud.

6) The government intends to enable PSR regulatory action by clarifying that the PSR may use its existing regulatory powers, as set out in the Financial Services (Banking Reform) Act, to require reimbursement in cases of APP scams in designated payment systems, including Faster Payments. The government intends to introduce this legislative amendment when Parliamentary time allows as part of the Financial Services and Markets Bill.

7) Regulation 90 of the Payment Services Regulations 2017 concerns the liability of payment service providers in relation to payment orders. Currently, where a payment is executed in accordance with the unique identifier (e.g. account number and sort code) provided by the customer, Regulation 90(1) states that a payment service provider has correctly executed the payment. The government’s amendment will make clear that this does not affect the ability of the PSR to use its existing regulatory powers in relation to APP scams. This will enable the PSR to establish a liability framework for APP scams using its existing powers, and ultimately improve reimbursement outcomes for victims of APP scams.

8) The government will also place a duty on the PSR which requires the PSR to take regulatory action within a prescribed timescale. The duty will require that the PSR:

a) Publish for consultation a draft regulatory requirement within 2 months of the provisions coming into force.

b) Impose a regulatory requirement within 6 months of the provisions coming into force.

9) The PSR intends to publish a consultation on its preferred approach to APP scam reimbursement in Autumn 2022.