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Payments Association Calls for APP Fraud Policy Reevaluation, Which? Disagrees

The Payments Association has expressed concerns that new regulation regarding Authorised Push Payment (APP) fraud could potentially hinder the growth of the payments industry in the UK and make it less appealing for investment. However, consumer advocacy group Which? insists regulatory measures will not have such adverse effects.

Earlier this month, the UK Payment Systems Regulators announced new reimbursement requirements for APP scams – when someone is tricked into sending money to a fraudster posing as a genuine payee – within the Faster Payments system. The new requirements aim to provide enhanced protection for victims of APP fraud and encourage proactive measures to prevent such frauds.

The proposed regulations will require banks and payments firms to reimburse victims of APP fraud within five business days. Figures show £485.2 million was lost to APP scams in 2022.

In an open letter to Lord Johnson, the Minister of State for Investment, director general Tony Craddock on behalf of the Association’s members, raises concerns that the latest anti-fraud policies, and “many other regulations recently proposed and adopted'” stifles growth.

It also warns that the regulations inflict damage on companies in the payments. industry, including credit institutions, e-money institutions and payments institutions.

The letter

The letter reads: “We accept that sometimes it is difficult for regulators to achieve the right balance between innovation, competition and protecting consumers, especially when they are working against a forthcoming statutory duty to act. But some regulators regulate in a way that stifles the growth of our industry.

“As a result the UK becomes a less attractive destination for investment and some companies leave our shores entirely.”

The letter also highlights what its members see “as the likely unintended consequences of some of the new policies to reduce APP fraud scams”.

The letter suggests three specific policies that warrant reconsideration: automatic reimbursement for almost all consumers affected by APP fraud (except the ‘grossly negligent’), a 50/50 cost-sharing arrangement between sending and receiving banks/issuers for compensation, and the lack of involvement of social media companies in fraud prevention.

The first

The Association said this may create more fraud, rather than reduce it, by malicious people pretending
to be ‘vulnerable’ according to the definition of vulnerability, and thus becoming automatically entitled to reimbursement even when they have been acting intentionally. It may also encourage ‘first party fraud’, where two parties wittingly arrange a ‘friendly scam’ to double their money.

The second

The letter says this will result in account issuers becoming more cautious about opening (or maintaining) marginal accounts because of concerns that they may have to accept 50% of the costs of any APP fraud. As a result, they will be less likely to open accounts for low income, disadvantaged, technologically challenged, older or vulnerable consumers, or close their accounts to limit exposure to this new level of liability. This is counter to our society’s objectives of including more vulnerable consumers in our financial system.

The third

Members say that without “involving social media giants, we will not stop most APP fraud at its source.
The proposed Online Safety Bill is just one step towards securing the involvement of upstream actors, which is critical to preventing fraud at source. But it is not enough.”

Government ‘should disregard’ claims

Which? director of policy and advocacy, Rocio Concha, in response to the Payments Association’s open letter, believes the government should disregard the arguments.

While acknowledging the emotional toll on victims, Which? disagrees with claims made in the association’s letter, particularly regarding the potential for increased fraud due to mandatory reimbursement.

“The UK is facing an epidemic of fraud, the impact of which goes far beyond the financial losses suffered as it can also have damaging effects on victims’ emotional wellbeing.

“The idea that new mandatory reimbursement requirements for authorised push payment fraud will lead to more people getting scammed because they know they will get their money back is dangerous scaremongering and the government should disregard it.

“Victims have for too long been badly let down by banks and payment providers after they have been scammed, with many being made to feel like they are the ones to blame – despite the increasingly sophisticated nature of scams. Mandatory reimbursement will lead to much fairer and more consistent treatment of victims, while incentivising the finance industry to improve fraud protections.”

Cross-departmental approach

The Payments Association ended its letter with a call for the Department for Business and Trade to recognise and support the UK payments industry’s leadership aspirations.

“We encourage you to help shape a cross-departmental approach that recognises the systemic importance of payments as an industry from which the UK government can derive impactful and tangible benefits for the British people.”


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