Pay.UK confirmation of payee standards, rules and guidance – 5 key points

On 18 October 2018 Pay.UK announced it had released to the market the standards, rules and guidance for the confirmation of payee (CoP) service. This is the latest in the line of industry initiatives to help protect consumers from falling victim to Authorised Push Payment (APP) fraud.  

When delivered by payment service providers, CoP will allow customers to check the name on an account they wish to make a payment to before they make a final decision to proceed. 

Five key points to note 

1 What is it?

Paul Horlock of Pay.UK said "Sending a payment with an incorrect sort code or account number is like addressing a letter with the wrong post code. Even if you have used the correct name it won’t reach the intended destination – and fraudsters have become increasingly sophisticated in using this to trick people into sending money to the wrong account." CoP is a way of giving customers an 'account name checking service' to help avoid payments being misdirected. One of the aims is to help prevent fraudulent payments being made in the first place.    

2 How will it work?

When a customer sets up a new payment, firms will be able to check the name on the account of the person or organisation being paid. Customers will then receive either (a) 'yes' if the account name matches, (b) 'No, please check' if a similar name to the account holder is used or (c) 'No, the name is wrong' if the name entered does not have any similarity to the name of the account holder. The customer will still have the decision whether or not to proceed with the payment but the risks of proceeding will be made clear if the customer continues after receiving a non-match.  

3 Contingent reimbursement model

On 28 September 2018, the APP Steering Group published the draft 'Contingent Reimbursement Model Code' designed to help protect consumers from APP fraud (the Voluntary Code). The code contains a number of examples where customers can be said to have met the requisite standard of care for reimbursement. It is anticipated that any customer who has taken due care and received a positive name match through CoP will get greater protection from financial loss if they have fallen victim to APP fraud. Likewise, if a customer has proceeded with a payment despite receiving a non-match response, this could be evidence of the customer failing to meet the requisite standard of care and therefore not receive a reimbursement. The Voluntary Code is due to be introduced in 2019 (see our update for further information). 

4 Limitations

Whilst this will help provide additional protection against certain types of fraud there will still be types of 'malicious payee' fraud that this initiative won't have any impact on, for example where a customer is tricked into paying for goods that do not exist. It is therefore important that CoP is used alongside the ongoing customer education work to continue to limit the number of scams.   

5 Next steps

On 28 September 2018, the Payment Systems Regulator (PSR) announced that it plans to consult by December 2018 on using its regulatory powers to give a general direction to firms to implement Confirmation of Payee. It is likely that the direction from the PSR will require firms who participate in faster payments systems to be capable of (a) responding to confirmation of payee requests by 1 April 2019 and (b) sending confirmation of payee requests by 1 July 2019. Further engagement regarding the guidelines will take place during the rest of 2018 to support their implementation. 

Comment 

CoP is the latest in a long line of industry initiatives to help combat the issue of APP fraud which has been a key consideration for both the regulator and firms since the Which? super-complaint.  Whilst CoP cannot prevent all types of fraud, it will introduce another hurdle for fraudsters to overreach. 

Contributors: Laura Fitzpatrick and Alanna Tregear

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions