PSR draft guidance on APP reimbursement

Supporting the identification of APP scams and civil disputes

Draft guidance on APP scams and civil disputes

On 18 July 2024, the Payment Systems Regulator (the PSR) published its Draft Guidance on “Authorised push payment scams reimbursement requirement – Supporting the identification of APP scams and civil disputes” (the Draft Guidance). In summary:

The Draft Guidance is intended to support Payment Service Providers (PSPs) in their assessment of whether an authorised push payment (APP) scam is not reimbursable under the reimbursement requirement because it is a private civil dispute. The PSR says it is intended to be guidance only as civil disputes and APP scams could look very similar and so each case needs to be considered on its merits.
The PSR says PSPs are to take a proportionate approach to assessing a claim and has reminded PSPs of the core principles (originally set out in its June policy statement):
- All PSPs should consider each claim and payment on its own merits.
- All PSPs should consider the circumstances leading up to the disputed payment(s).
- The sending PSP should consider all available relevant information when assessing a claim.
- The sending PSP should make best efforts to gather relevant information in a timely manner.
- The receiving PSP(s) should provide accurate and complete information where requested or material about the receiving account and the account holder.
When seeking to distinguish between a civil dispute and an APP scam, the PSP should consider (amongst other things) – (1) whether the recipient is not who the consumer intended to pay, (2) whether the payment is not for the purpose the consumer intended and (3) if there is any evidence the consumer has been deceived or manipulated. Where a consumer has paid an unintended recipient and there is no evidence to suggest that the payment was accidently misdirected, and there is evidence of an intent to defraud, it is more than likely to indicate an APP scam has taken place.
The PSR has set out some high level factors for PSPs to take into account when trying to determine if a claim relates to a civil dispute or a reimbursable claim as follows:

The communication and relationship between the consumer and the alleged scammer	PSPs should consider any evidence the consumer can provide of the relationship with the alleged scammer, including the content of any communications. Where a consumer knew the person they were paying or had previously paid them and received goods then this is more likely to indicate this was a civil dispute (although it should be considered on the merits as a fraudster may have completed a previous order to gain the consumer’s trust).
The trading status of the alleged scammer	PSPs should consider if the trading status of the alleged scammer at the time of the payment(s) supports the view that there has been impersonation, relevant intent to deceive or misrepresentation by the alleged scammer. PSPs should also check the FCA register, Companies House and any other information provided by a third party.
The alleged scammer’s capability to deliver the goods and services related to the claim	PSPs should consider the alleged scammer’s capability to deliver, including whether this points to an intent to defraud as opposed to a legitimate commercial transaction that failed to work out as expected. Any assessment should include the communication and engagement between the consumer and alleged scammer. The PSR highlights that in some APP scams, a nominal service may have been started or delivered to induce the consumer into believing the legitimacy of the goods or services being offered. PSPs are therefore asked to consider all other high-level factors.
The extent to which the alleged scammer deceived the consumer as to the purpose of the payment	PSPs should consider the extent to which the alleged scammer deceived the consumer as to the intended purpose of the payment. For example, where there is evidence that the consumer intended the payment to be used for a specific purpose, but the alleged scammer dishonestly intended to deceive the consumer into making the payment for the different purpose of making a gain for themselves. It is noted that dishonesty on its own is not sufficient to consider a payment an APP scam and that it is necessary for PSPs to evidence that the alleged scammer’s dishonest actions relate to the intended purpose of the payment.
Information held by the receiving PSP(s) about the relevant account(s)	The PSR expects receiving PSPs to share relevant information with the sending PSP (recognising the PSP may be limited in the actual evidence they can share due to data-sharing restrictions but noting they can provide an indication as to the assessment they have conducted). The information the PSR says should be considered is (a) account opening information (b) account history / usage (c) any markers on the account (d) any previous fraud claims and (e) information gathered from their account holder. PSPs are also reminded that they may stop the clock under one of the reasons set out in the Faster Payment reimbursement rules and Specific Requirement 1 to ask for information from the receiving PSP or other third parties.

What does this mean for you?

Ahead of 7 October 2024, PSPs will be considering and developing a treatment plan or, assessment criteria to assess whether a payment will be categorised as a ‘reimbursable FPS APP scam payment’. This guidance will help PSPs to formulate a guide for its colleagues on whether a payment should be considered a civil dispute or APP scam (and then whether it is a reimbursable FPS APP scam payment). Any treatment strategies should also highlight the stop the clock provisions to ensure PSPs are using the tools available to them to achieve the correct outcome for the consumer.
The PSR identifies in the Draft Guidance that certain APP scam claims involve a complex set of factors that need to be carefully and proportionately balanced. It is also recognised in the PSR’s latest policy statement (PS24/3 Faster Payments APP scams reimbursement requirement: compliance and monitoring (psr.org.uk)) that there is a need to ensure complex cases can be identified using clear criteria and that appropriate steps are taken to manage them (as some complex claims may require more than 35 business days to assess). The PSR and Pay.UK will be working on the identification and management of complex claims over the coming months.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.

Date published

25 July 2024