APP Fraud And Vulnerable Customers ' Lost In Implementation?

• Published date: 13 July 2023
• Subject Matter: Criminal Law, White Collar Crime, Anti-Corruption & Fraud
• Law Firm: Herbert Smith Freehills
• Author: Ms Jenny Stainsby

In its June 2023 Policy Statement on authorised push payment (APP) fraud (PS23/3), the Payment Systems Regulator (PSR) said that payment service providers (PSPs) would not be required to reimburse customers who had failed to exercise the 'customer standard of caution' (on which guidance is awaited) for APP fraud claims. This makes sense and is consistent with the regulatory principle that 'consumers should take responsibility for their decisions'¹.

In principle, this exception to reimbursement would not apply in respect of vulnerable customers i.e. a vulnerable customer would not be expected to exercise the customer standard of caution - an exception to the exception. However, the PSR seemed to be clear in PS23/3 that 'This is not a blanket exception for all customers who exhibit any characteristics of vulnerability' and that a firm should determine whether the customer's characteristics of vulnerability 'led them to be defrauded'². In other words, vulnerability would not, of itself, require a PSP to default to making reimbursement.

This (important) nuance however seems to have got lost in implementation. In Consultation Paper 23/4 on the new reimbursement requirement (CP23/4) issued in July 2023, the PSR has published drafts of the legal documents required to implement the APP fraud reimbursement requirement. Contrary to the indication in PS23/3, the relevant provision does appear to introduce a blanket approach:

'PSPs will not be required to reimburse any APP scam payments where the consumer standard of care exception applies, unless the victim was a vulnerable consumer at the time the reimbursable APP scam payments were made.'

(In this case, 'vulnerable...