As we’ve written before, reducing APP fraud and the resulting consumer harm is a strategic priority for the Payment Systems Regulator (PSR) and new rules will come into force next month. 

The PSR has now issued guidance to help Payment Service Providers (PSPs) decide if an APP (authorised push payment) scam claim raised by a consumer is not reimbursable under the FPS and CHAPS reimbursement rules because it is a private civil dispute. The PSR defines a private civil dispute as a dispute between a consumer and payee which is a private matter between them for resolution in the civil courts, rather than involving criminal fraud or dishonesty. 

The guidance applies to claims for payments made via Faster Payments and CHAPS. It includes the factors that PSPs should consider when assessing whether a claim solely relates to a civil dispute and does not fall within the requirement to reimburse. It does not put any expectations on consumers. Civil disputes and scams might look very similar, so each case must be considered in accordance with the facts available.

In its June 2023 policy statement, the PSR confirmed that claims which relate to a civil dispute would not be reimbursable. Civil disputes can vary in nature but usually involve a consumer paying a legitimate supplier for goods or services and not receiving them, or the products are defective in some way, and there is no indication of an intent to defraud.

The guidance does not form part of Specific Directions 20 or 21, but it is intended to support PSPs’ compliance with the legal requirements and FPS/CHAPS reimbursement rules. If the PSR is assessing if a PSP has complied with Specific Directions 20 or 21, it will consider each case on its individual merits, including the extent to which a PSP has (or can demonstrate that it has) considered the guidance.

PSPs sending payments must take a proportionate approach to validating claims based on the relative complexity and value of the fraud. The PSR does not expect them to undertake complex or resource-intensive investigations for simple APP fraud claims. The information for most cases should be gathered through the customer’s initial claim.

The PSR has set out the core principles which PSPs should use to guide their assessment of whether there is an APP scam claim. These are:

  • All PSPs should consider each claim and payment on its own merits;
  • All PSPs should consider the circumstances leading up to the disputed payment(s);
  • The sending PSP should consider all available relevant information when assessing a claim;
  • The sending PSP should make best efforts to gather relevant information in a timely manner;
  • The receiving PSP(s) should provide accurate and complete information or material about the receiving account and the account holder;
  • Where a PSP believes the consumer’s claim for reimbursement is a civil dispute, the onus is on the PSP to demonstrate why and to clearly communicate this to the consumer or their representative; and
  • PSPs should also record this in their internal records.

The high-level factors a PSP must consider are categorised into five key areas:

  • The communication and relationship between the consumer and the alleged scammer;
  • The trading status of the alleged scammer;
  • The alleged scammer’s capability to deliver any goods and services related to the claim;
  • The extent to which the alleged scammer deceived the consumer as to the purpose of the payment; and
  • Information held by the receiving PSP(s) about the relevant account(s).

The PSR recognises that certain cases may involve a complex set of factors, which will need to be carefully balanced. It will be engaging Pay.UK and industry on developing a detailed operational process for allocating and managing complex cases.