The UK has introduced new regulations requiring banks and other payment firms to reimburse victims of authorized push payment (APP) fraud, where individuals are deceived into sending money to criminals.
The rules require banks to refund customers who are not at fault within five business days, with a reimbursement limit set at £85,000. This applies to payments made through the UK’s Faster Payments service, which is commonly used for mobile and online banking, as well as the CHAPS payment system, typically used for higher-value transactions like real estate.
One of the goals of the scheme is to give banks more reasons to prevent fraud before it happens.
“Our new requirements will see all payment firms involved facing strong incentives to introduce more robust ways of identifying and preventing these scams from happening in the first place,” said David Geale, Managing Director of the Payment Systems Regulator, said in a statement. “Firms have already made a good start in making changes, and we expect to continue seeing new and innovative systems being rolled out to drive fraud out of our payment systems.”
The speedy reimbursement period should also help prevent these scams.
“The reimbursement rules for APP scams are a positive step forward for scam victims in the UK and serve as a solid blueprint for other economies reassessing their own scam reimbursement policies and regulations—or lack thereof,” said Suzanne Sando, Senior Analyst for Fraud and Security at Javelin Strategy & Research.
“They are also a great motivator for financial institutions in the U.S. to shore up their current fraud and scams detection,” she said. “Real-time technology weeds out suspicious activity before a consumer authorizes a transaction, whereas waiting to investigate after the fact is too late, leaving scam victims on the hook for the money.”
U.S. Bound?
Although the regulation has been under review since last year, the payment cap was only lowered two weeks ago. The UK’s Payment Systems Regulator announced last month that it was reducing the limit from £415,000 to £85,000, claiming that the lower threshold would still cover 99% of APP fraud claims.
However, don’t expect to see similar legislation in the United States anytime soon.
“I think we have a long way to go before the U.S. ever sees large-scale sweeping regulation regarding scam reimbursement,” said Sando. “And mandated reimbursement could prove costly for smaller community financial institutions. That’s why having strong technology in place is so critical in catching suspicious activity before it’s too late—it’s so much easier to play from ahead than from behind.”
