New protection rules which came in on October 7 mean banks will now refund qualifying Authorised Push Payment (APP) payments where someone has unwittingly paid a fraudster. The rules apply to transactions made between UK accounts using the Faster Payments system – used for mobile and online banking – and the CHAPS system for high-value payments.
APP fraud is when someone is tricked into sending money from their bank account to a fraudster. This kind of fraud can have devastating impacts on the victim and can also reduce consumer confidence more widely, according to the Payment Systems Regulator (PSR).
David Geale, Managing Director of the Payment Systems Regulator, said: “[This change will make] it quicker and simpler for victims of APP scams to get back money they’ve lost to criminals, with a guaranteed minimum level of protection in place.
“But not only that, our new requirements will see all payment firms involved facing strong incentives to introduce more robust ways of identifying and preventing these scams from happening in the first place. Firms have already made a good start in making changes and we expect to continue seeing new and innovative systems being rolled out to drive fraud out of our payment systems.”
What does this mean in practice?
Various financial services companies – from high street banks and building societies through to smaller payment and e-money firms – will now need to follow the new rules and reimburse qualifying customers who have been victims of APP fraud. This means that:
- Everyone making a payment via Faster Payments or CHAPS from one UK bank account to another will be covered.
- Most consumers can expect to be reimbursed within five business days of making their claim, with the new rules seeing over 99% of claims by volume covered.
- People will be covered up to £85,000 as standard, but banks and payment firms can still reimburse above that amount. Firms may also choose to apply an optional excess of up to £100, though this cannot be applied to vulnerable consumers.
- Anyone who suffers a loss exceeding £85,000 can still raise their case with their payment provider and if they remain unsatisfied, they can take their case to the Financial Ombudsman Service. The Ombudsman is independent and looks at each case on its own individual merits.
Source: PSR
Any payment made after October 7, 2024, will be protected by these new rules, and they cover individuals, microenterprises and charities.
You must still be careful making any payments
Even though the level of protection has been beefed up, people should still be careful and double check all details before pressing the button when making payments, because there are times when you won’t be able to make a successful claim from your provider.
This would include if you were found to be complicit in a fraud, or you had been grossly negligent and that is why you were defrauded. But the determination of gross negligence is set at a “high bar” according to the PSR, and this doesn’t apply to vulnerable customers.
The onus is on your bank or other financial services provider to prove you have acted with gross negligence. This is possible if you had been “ignoring specific, tailored warnings or not responding to reasonable requests for information”, said the PSR.
There are many ways to protect yourself
There are so many types of fraud that it can be difficult to work out how to avoid becoming a victim. But as a baseline, you should always take notice of any warnings from your bank or other payment provider and use the Confirmation of Payee service which cross checks that an account name is correct.
This way you know you will be paying the right business or person, and the money isn’t going somewhere you don’t expect. More than two billion checks have been made through this service already, and an extra 350 companies should have signed up to this service by the end of October.
If you think you have been the victim of a fraud, you should report it to your account provider as soon as you can, and at the very latest within 13 months of the fraudulent transaction. Your bank or other payment provider will guide you through the process of making a claim.
During any claim, you should:
- Respond to any requests for information from your bank promptly – after checking that the request is genuine.
- Report the details to the police or consent to your provider reporting to the police on your behalf.
Source: PSR
If you are unhappy with the way your payment provider is responding to your claim, you can always go to the Financial Ombudsman Service to have the case reviewed. The maximum amount that can be claimed from a financial institution directly is £85,000 – unless the financial services provider chooses to reimburse more – which is the equivalent amount to that covered by the Financial Services Compensation Scheme. If you have lost more than this, then the Ombudsman can rule on amounts up to £430,000. You should not have to pay the Ombudsman to consider your case.
You can find more information on the Take Five to Stop Fraud campaign website, which will help you stay safe when making online payments.
