UK payments watchdog rejects industry call to delay fraud refund plan

The interim head of the UK payments regulator has rejected a call from some companies in the sector to delay a contentious fraud reimbursement plan, two weeks after his predecessor resigned amid growing criticism of the proposals.

David Geale said the Payment Systems Regulator needed to “act quickly” on authorised push payment fraud, and that new rules forcing banks and payment companies to reimburse victims up to £415,000 per claim would be introduced in October.

“We will continue to engage with and support industry, taking into account all feedback as we move forward and as industry works hard to implement the systems and processes needed for the new reimbursement requirements,” he added in a statement on Monday.

Geale’s comments came after the Payments Association told him in a letter that delaying implementation of the rules on APP fraud by a year would “ensure the right policies, technology and systems are in place to avoid permanent damage to the UK’s payment industry”.

Britons lost about £459.7mn to APP fraud — which includes purchase scams, online investment schemes, and criminals tricking victims into sending them money by posing as a contact — in 2023, according to trade body UK Finance.

The Payment Association’s request came two weeks after Chris Hemsley quit as PSR head following a backlash from industry and the government over the rules.

City minister Bim Afolami last month hit out at “significant problems” with the regulator’s proposals, adding to public criticism of independent watchdogs by Treasury ministers in recent months.

About 30 members of the Payments Association previously complained in a letter to Afolami that the changes to reimbursement could threaten the survival of smaller fintech companies. The trade body wants the reimbursement threshold to be set at £30,000. Reimbursement is voluntary at present.

The trade body told the PSR in a briefing paper on Monday that delaying the rules would also give regulators and legislators more time to involve tech and social media companies in the reimbursement process.

Almost 80 per cent of APP fraud starts online, according to UK Finance.

Riccardo Tordera-Ricchi, head of policy and government relations at the Payments Association, said before the letter was sent that if the changes were put in place as planned, “the prudential risk and requirements to participate in the UK payments market will increase significantly”.

“It will also result in an increase in cost and friction of real-time payments and a decrease in investment into the UK fintech market due to higher risks of failure and lower profitability,” he added.

The plea from the industry came on Geale’s first day at the helm after the PSR confirmed Hemsley’s “imminent” departure at the end of last month.

Geale has sat on the PSR’s board since 2020 and was previously director of retail banking at the Financial Conduct Authority, the main financial regulator.

UK Finance has also previously voiced concerns about the proposed changes, saying they risk encouraging more “complicit fraud” if criminals pose as victims to claim compensation illegitimately.

However, the trade body said it was not calling for an extension of the rules and that its members were working towards the October deadline.

Consumer groups also hit back at the request. Rocio Concha, director of policy and advocacy at Which?, called the Payment Association’s letter a “desperate attempt from a small section of the banking industry to shirk responsibility” and said payment companies “should be focusing on getting their house in order to protect customers from fraud”.