UK Payments Sector Wants Fraud Reimbursement Rules Delayed

British payments firms have called for a delay on new, controversial fraud reimbursement rules. The Payments Association on Monday (June 10) called on the U.K.’s Payment Systems Regulator (PSR) to hold off on regulations requiring banks and payment companies to reimburse victims of authorized push payment (APP) fraud up to £415,000 ($527,000) for each claim. As […]

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British payments firms have called for a delay on new, controversial fraud reimbursement rules.

The Payments Association on Monday (June 10) called on the U.K.’s Payment Systems Regulator (PSR) to hold off on regulations requiring banks and payment companies to reimburse victims of authorized push payment (APP) fraud up to £415,000 ($527,000) for each claim.

As the Financial Times (FT) reported, the association wrote to interim managing PSR director David Geale to argue that delaying the rules for a year would let the industry “ensure the right policies, technology and systems are in place to avoid permanent damage to the U.K.’s payment industry.”

The report also includes comments from Riccardo Tordera-Ricchi, head of policy and government relations at the Payments Association, who said if the planned APP fraud reimbursement changes went into effect, “the prudential risk and requirements to participate in the U.K. payments market will increase significantly.”

“It will also result in an increase in cost and friction of real-time payments and a decrease in investment into the U.K. FinTech market due to higher risks of failure and lower profitability,” he added.

PYMNTS has contacted the PSR for comment and is awaiting a statement from an agency spokeperson.

The Payments Association request comes 10 days after former PSR director Chris Hemsley stepped down in the wake of industry/government pushback on the regulation.

Executives met last month with Economic Secretary to the Treasury Bim Afolami to express their concerns, arguing that an increased refund limit could lead consumers to act more recklessly if they knew companies would cover their losses. Afolami himself has said he has “significant problems” with the measure.

Advocates say the bill is designed to combat a surge in APP fraud, which happens when a customer is tricked into having their bank move money to another account, in many cases for what they think is a legitimate purpose like paying bills, but to what is actually a scammer.

According to data from the PSR, U.K. APP fraud constituted 40% of all fraud losses in 2022, with the Trustee Savings Bank (TSB) alone reimbursing more than 90% of the total value of APP fraud losses for that year. Nationwide, HSBC, and Barclays also refunded portions, with respective rates of 78%, 73% and 70%.

PYMNTS examined the proposal in March, arguing that the policy “put banks and payment firms in a tough spot.”

“The new liability placed on them incentivizes them to take measures to minimize the occurrence of such fraud, and to protect themselves from potential losses, banks might opt to revoke or restrict the option for consumers to make authorized push payments — inconveniencing their customers and restricting their ability to make payments at the same speed as their peers in other countries,” that report said.

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