APP fraud: UK PSR confirms reduced maximum level of reimbursement

Key takeaways

• The PSR’s statement confirms that it will implement its FPS APP fraud mandatory reimbursement requirement policy with an initial maximum level of reimbursement of £85,000 per FPS APP scam claim. This is instead of the previous limit of £415,000, which had been set to reflect the Financial Ombudsman Service’s (FOS) maximum reimbursement limit (although this has subsequently been raised to £430,000 by the FOS).

• The PSR also confirms that the Bank of England (BoE), as the operator of CHAPS, has decided that the maximum reimbursement for CHAPS will be £85,000.

What should firms be thinking about?

• While the change is good news for in-scope payment service providers (PSPs), reducing the maximum claim limit under the mandatory reimbursement requirements is likely to increase the number of complaints made to the FOS. It should also be borne in mind that the FOS has the ability to apply additional award limits (up to the current limit of £430,000) where a complaint falls under their wider jurisdiction e.g. Consumer Duty.
• In its consultation on the reduced maximum reimbursement level, the PSR stated that where PSPs have already communicated with their customers about their rights under the policy, it doesn’t expect them to necessarily retract or amend those communications at this stage. However, firms should provide up-to-date information to their consumers in any further communications with them. The PSR also stated that PSPs should have plans in place to communicate the change to the maximum level of reimbursement to their customers ‘as soon as practicable, and before any contractual changes come into effect’ – although it recognised that this may not be possible for all firms ahead of the policy start date.

What’s next?

• The change to the FPS and CHAPS maximum reimbursement level takes effect from the policy start date, which remains 7 October 2024.
• The PSR plans to publish a final policy statement to explain the reasoning for the decision during the week of 30 September 2024 (so slightly later than its original timing of close of business on 26 September 2024).
• The PSR is planning to update its ‘APP scams reimbursement information on consumer communications for PSPs’ to reflect the change to the maximum reimbursement level.
• Both the FPS and CHAPS maximum reimbursement levels remain subject to review by the PSR and the BoE respectively after 12 months.

If you would like to discuss this latest development or any other aspect of the new APP fraud reimbursement requirement, please get in touch with any of the people listed above or your usual Hogan Lovells contact.

Authored by Virginia Montgomery.