PSR consultation on Faster Payments APP scams: Changing the maximum level of reimbursement - Which? response

Summary:

• We are extremely disappointed with the PSR’s proposal to reduce the maximum level of reimbursement for the APP scams reimbursement requirement from £415,000 to £85,000. This proposed change represents a significant U-turn in the regulator’s proposals for a maximum threshold on reimbursement claims, just one month before the planned implementation of the new requirement. We do not believe the information presented in this consultation provides strong justification for changing this proposal; it appears the only benefit will be to reward firms that have not put in place the necessary measures to protect their customers and have previously been warned over their role in facilitating financial crime.  
• The PSR must stick to its original proposal for a £415,000 cap on APP scam claims made via Faster Payments and CHAPS.Reducing the upper limit would significantly dilute the vital consumer protections that this policy would be bringing in, and risks exposing victims of high-value fraud to life-changing financial and emotional harm. We have several concerns about the impact of reducing the maximum reimbursement level to £85,000, including that:
  • It would provide weaker incentives for PSPs to increase their investment in APP fraud prevention. We do not think that reducing the upper limit would be driving the right incentives for PSPs to increase their investment in effective fraud prevention systems. A £415,000 cap would provide much stronger incentives for PSPs to do more to improve their fraud prevention and detection measures as they would be liable for reimbursing a higher amount of losses.
  • Consumers making high value payments could be exposed to massive amounts of personal liability if they were subject to APP fraud. High value payments occur on both Faster Payments and CHAPS. However, we feel the Bank’s decision to align the CHAPS reimbursement limit to the PSR’s decision is particularly inappropriate. CHAPS is commonly used by solicitors and conveyancers to complete housing and other property transactions, while individuals may use CHAPS to buy high-value items such as a car or pay a deposit for a house. The vast majority of these transactions would not be protected in full under the new proposed upper limit, leaving many customers at significant risk.
  • There is no mention of the impact the proposed change could have on victims in vulnerable circumstances. Reducing the reimbursement limit to £85,000 would mean vulnerable victims of frauds above this level would have to bear life-changing financial losses, which could exacerbate emotional and psychological harm for these victims. There is a severe lack of data on who the victims of these high value frauds are and the subsequent harm they face.  
  • There is a significant discrepancy between the FOS’ maximum reward limit of £430,000, and the PSR’s proposed upper limit of £85,000. This could complicate the complaints process for consumers and lead to confusion as to how their cases may be assessed and what the maximum reward limit is. The proposed change would lead to more complaints being made to the FOS, adding to its already-high caseload and leading to significant delays for victims in receiving their outcomes.
• It is paramount that the reimbursement requirement is implemented on 7 October. Banks and payment firms of all sizes have had sufficient time to prepare for implementation, and the PSR has already consulted extensively on the maximum reimbursement limit on APP scam claims. Any further delays, especially as result of this proposed change, would be entirely unacceptable and lead to unnecessary emotional and financial harm for victims. 
• The PSR’s post-implementation review must thoroughly evaluate the impact of the upper limit on consumers, especially if the PSR does decide to reduce the maximum level of reimbursement. The PSR must be willing and ready to increase the maximum reimbursement threshold where its findings show that a significant number of high-value scams are being excluded from reimbursement, exposing victims to significant harm.