PSR lowers maximum limit to fraud compensation payouts

The Payment Systems Regulator (PSR) has announced that it is going to consult on reducing the upper limit for authorised push-payment (APP) fraud reimbursement from £415,000 to £85,000 after finding the lower threshold would still cover more than 99% of authorised push payment fraud cases by volume.

The PSR had previously published its requirements for payment firms to reimburse APP scam victims in December 2023, it committed to considering high-value APP fraud claims. The PSR’s review found that – out of over 250,000 cases – there were 18 instances in 2023 of people being scammed for more than £415,000, and 411 instances of more than £85,000. The analysis also highlighted that almost all high-value scams are made up of multiple smaller transactions, reducing the effectiveness of transaction limits as a tool to manage exposure. 

The PSR says that additional evidence from the industry and FCA about the maximum liability amount has been considered. After reviewing the findings and evidence provided, the PSR is consulting on a new cap. If confirmed, this would bring the cap in line with the Financial Services Compensation Scheme (FSCS) limit which is currently £85,000 and well understood by consumers. This would still ensure enhanced consumer protections against APP scams, with clear incentives on financial firms to continue doing all they can from preventing fraud from happening in the first instance. The previous maximum reimbursement value had been set at £415,000, in line with the Financial Ombudsman maximum reimbursement limit at that time.  

The proposed new cap will still see over 99% of claims (by volume) covered.  The PSR’s measures to protect people against APP fraud and make sure victims get their money back remain stronger than anywhere else in the world. The regulator has also committed to keeping this under consideration through its post-implementation review. The PSR fully expects all firms to meet their obligations as responsible providers and will continue to follow up with all firms to support this. 

David Geale, the PSR’s Managing Director, said “We listened to concerns about the reimbursement limit and committed to collecting more evidence to inform our approach. As a result, we are now consulting on a limit that still covers the vast majority of authorised push payment scams and strikes the right balance. Under our proposals, consumers in the UK will still receive world-leading protection, payment providers will still be heavily incentivised to improve anti-fraud protections and we maintain effective market competition and innovation.”  

Anna Roughley, Head of Insight at the Lending Standards Board (LSB) said “The current consumer protections against APP fraud provided by the CRM Code have no cap on reimbursement and there is no excess fee for fraud victims making a claim. Importantly, the Code also contains specific provisions on APP fraud prevention and detection, which stop consumers from being harmed, stop money from reaching criminals, and stop firms from having to face the cost of reimbursement.

“The PSR’s new framework will be bringing many new Payment Service Providers into the scope of a reimbursement scheme for the first time. As the sector adapts to the new framework, we would urge all Payment Service Providers to look to the lessons of the CRM Code and the emphasis it put on prevention and detection. The Code has had a significant, positive impact and helped to slow the growth of APP fraud, lower the average amount stolen per case, and more-than treble reimbursement rates.”