Scam reimbursement: pushing for a better solution – Report Summary

This is a House of Commons Committee report, with recommendations to government. The Government has two months to respond.

Author: Treasury Committee

Related inquiry: Authorised push payment fraud reimbursement scheme

Date Published: 6 February 2023

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Authorised push payment (APP) scams occur when a fraudster tricks someone into transferring money into another account. It is a common crime and causes untold misery. In 2021 victims were defrauded of at least £583 million as a result of APP scams. Once someone realises they have been scammed it is often too late to stop it.

In 2016, the consumer organisation Which? made a super-complaint to the Payment Systems Regulator (PSR) in which it argued that banks could do more to protect consumers from APP fraud. In 2019, a voluntary code for reimbursement of victims was developed, to which ten banks and other payment services providers (PSPs) are currently signatories. In the face of growing harm from APP fraud, the Treasury Committee called in November 2019 for the code to be made mandatory. Following up that recommendation, in February 2022 our Economic Crime report called for urgent legislation to make reimbursement mandatory.

The Financial Services and Markets Bill currently making its way through Parliament will require the PSR to establish a system for mandatory reimbursement of APP fraud over the Faster Payments system. We recommend that system should be fully implemented by the end of 2023.

The PSR recently consulted on its proposals for the mandatory reimbursement system. They were considered by our Sub-Committee on Financial Services Regulations. Rather than using its own powers as a regulator to direct banks and other PSPs to reimburse victims of APP fraud, the PSR proposes to ask Pay.UK, the Faster Payments system operator, to make, maintain and enforce reimbursement rules.

We have three major concerns about this approach:

i) Pay.UK is an industry body. It is a company guaranteed by the very banks and other PSPs it would be asking to reimburse fraud victims.

ii) It is a recipe for further unacceptable delay. Pay.UK’s governance structures and lack of regulatory powers provide opportunities for banks and other PSPs to continue to drag their feet on reimbursement.

iii) Pay.UK is not a regulator. It lacks the necessary powers to enforce its rules. It would need to fall back on the PSR to ensure compliance.

We therefore recommend that the PSR use its powers of direction to banks and other payment service providers. This will give the PSR more control over the reimbursement process and result in better outcomes for consumers.