The CEO of UK Finance and I have written to Pay.UK to urge it to back a vital scams reimbursement funding proposal. Here’s our letter to its chair, Ms Melanie Johnson.
PayUK has now rejected the proposal that we set out last month in the letter below.
However, the industry trade body has now announced a three month extension to the current scheme funded by the major banks. The scheme will be extended to March 2020.
This agreement is merely a stopgap that highlights the industry’s failure to secure vital long-term reimbursement for innocent victims of devastating transfer fraud.
It’s clear that a voluntary, industry-led approach to protecting scam victims is not enough.
The next government must work with the regulator to make the code and reimbursement mandatory – to finally ensure millions of people are no longer at risk of losing life-changing sums of money.
Original letter (08/10/2019)
Dear Ms Johnson,
This joint letter from Which?, the largest consumer organisation in the UK, and UK Finance, on behalf of HSBC, Santander, Barclays, Lloyds, Metro, Nationwide and RBS follows the Pay.UK Call for Information and is in support of the Faster Payment Scheme (FPS) Change Request.
Authorised Push Payment (APP) fraud is a crime which can have a devastating impact on its victims, which is why protecting consumers is a priority for us all.
The launch of the voluntary Contingent Reimbursement Model Code in May set a new standard of consumer protection from this type of fraud, with a commitment from signatory firms to reimburse victims provided the customer has met the standards expected of them under the Code.
The Code was produced by the APP Scams Steering Group, which was composed of representatives from consumer groups, the finance industry, government bodies and regulators.
‘No blame’ fund
The proposal set out in the Change Request for an FPS CRM fee will provide a long-term, sustainable funding system for the reimbursement of victims of APP scams under the voluntary Code in situations where both the customer and payment service provider (PSP) have done everything expected of them, known as a ‘no blame’ situation.
Funds gained from the FPS fee will be held centrally in a ‘no blame’ fund.
If the Pay.UK board fails to pass the Change Request, many victims of APP scams could once again risk losing their life savings to this devastating crime.
Following consultation on seven funding options, with responses received from 34 stakeholders, including many Pay.UK participants, the Steering Group agreed that the FPS model is the best method to ensure that reimbursement for blameless victims continues beyond the end of this year.
As well as providing reimbursement in a ‘no blame’ situation for customers of PSPs which are signatories to the Code, the proposed model represents the only long-term funding option that also guarantees customers will be covered if their PSP is not a signatory.
If a customer is a victim of an APP fraud and their PSP is not signed up to the Code, they will be able to take their case to the Financial Ombudsman Service which will have the power to refer the PSP to the ‘no blame’ fund to reimburse the customer.
Reducing APP scams
The proposed fee would provide a financial incentive for the firms involved in push payments to individually and collectively reduce APP scams, above and beyond the minimum requirements in the Code.
The protection that the fee offers consumers could also benefit payment providers and Pay.UK by strengthening trust among consumers in the Faster Payments Service.
The Faster Payments Service was designed for speed and convenience. Unfortunately, sensible pro-customer and pro-growth measures are being exploited by criminals.
Latest data from UK Finance shows that in the first six months on 2019, 95per cent of all APP fraud involved a customer making a Faster Payment. Therefore, it is important for Pay.UK to consider the part it can play in the fight against this growing fraud, by recognising that it has the power to take decisive action to protect end users.
The FPS Change Request, submitted to Pay.UK in June, provides a mechanism to achieve this consumer protection.
As well as being the decision of the APP Scams Steering Group, the Change Request also demonstrably fits with Pay.UK’s strategic objectives. Specifically, these include being “end user focussed” and “acting as a catalyst for change in the payments industry; addressing threats; and supporting industry-wide initiatives.
The fight against rising APP fraud has become an issue for society to tackle. Pay.UK is supporting these efforts with its work to introduce the Confirmation of Payee service.
Careful consideration of the case for the CRM FPS Fee is now needed, as Pay.UK assesses the responses to its Call for Information.
This well-thought through and widely supported option is proportionate to payment providers of different sizes, consistent with the APP Scams Steering Group proposals, and widely supported by consumer bodies and much of the financial industry.
We urge the Pay.UK board to accept this proposal, and put the protection of consumers at the heart of its decision.
Anabel Hoult, CEO of Which?
Stephen Jones, CEO of UK Finance.