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UK launches new initiative against payment fraud

Chris Hamblin, Editor, London, 19 December 2016

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The Financial Conduct Authority's Payment Systems Regulator, the economic regulator for the £75 trillion UK payment systems industry, has announced the start of a concerted and co-ordinated industry-wide effort to tackle payment scams.

The regulator has published its response to a so-called 'super-complaint' issued by consumer watchdog Which?, about protection for people who make authorised ‘push’ payments or APPs. In its response, the sub-regulator outlines an approach that envisions regulators and firms promising to working together to protect coonsumers from fraud in a better way than they do today.

APP scams

Which? raised worries that there was not enough protection for people who are tricked into transferring money to a fraudster through an authorised push payment, which occurs when the consumer instructs his bank to send money.

The regulator has now examined Which?’s evidence and gathered its own to build a clearer understanding of the issue. As a result, the regulator is warning that APP scams are a growing concern, and more needs to be done to address the problem.

An absence of legal protection

It has, however, disappointed the consumer community by stating that product service providers are not liable for APP scams because APPs are payments that the customer has authorised himself, i.e. for which he has granted consent for the purpose of the Payment Services Regulations 2009. A product service provider, it says, is under a strict obligation to comply with its customer’s mandate, which means there are legal limits to what it can do when faced with a customer who is determined to authorise a payment.

In terms of payments’ liability, the principal distinction in law is between authorised and unauthorised payments – not push and pull payments. The liability regime for push and pull payments is, for the most part, the same.
The protection regimes for specific types of pull payments, such as card payments and direct debits, cannot necessarily be mapped directly onto online push payments.

Among its findings, the PSR states that, in contrast to other types of fraud and scams, the data available on the scale and type of APP scams is poor in quality and the ways in which banks currently work together in responding to reports of scams ought to improve.  

The PSR also found evidence to suggest some banks could do more to identify potentially fraudulent incoming payments, and to prevent accounts falling under the influence of scammers.

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