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The Payments Association has issued a warning to the UK government, expressing concerns about the potential “unintended consequences” of new policies aimed at combating Authorised Push Payments (APP) fraud.
APP fraud has emerged as a significant form of fraud in the UK, resulting in losses of nearly £500 million in the past year. This has led to increasing pressure from consumer groups and politicians for banks to address the issue promptly and expedite reimbursement for innocent victims.
Earlier this month, the Payment Systems Regulator introduced new rules that are expected to take effect in 2024. While the Payments Association acknowledges some positive aspects of the new plan, it highlights two policies that could have unintended consequences, as well as an important issue that has been overlooked.
The first concern raised by the association pertains to the provision that ensures all consumers affected by APP fraud will be reimbursed unless they are deemed “grossly negligent.” The concern is that this policy may inadvertently encourage fraud, as individuals might feign vulnerability to automatically qualify for reimbursement even if they have intentionally engaged in fraudulent activities.
The decision to split the compensation costs equally (50/50) between the sending bank/issuer and the receiving bank/issuer is another area of concern. This approach could lead financial institutions to become more cautious when opening accounts for individuals with marginal financial profiles, potentially disadvantaging low-income and vulnerable individuals.
Additionally, the association argues that the omission of social media companies from the strategy means that the root cause of APP fraud is not being adequately addressed.
The Payments Association, representing over 300 firms, urges the government to consider these concerns and suggests that a comprehensive approach involving collaboration with social media companies should be adopted to effectively combat APP fraud at its source.
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