Authorised push payment fraud: the FCA and the FOS propose wider jurisdiction for payer complaints

The Financial Conduct Authority has announced plans to make it easier for victims of authorised push payment fraud to make complaints about payment services providers who receive the fraudulent payments.

CP 18/16, published on 26 June 2018, is a joint consultation with the Financial Ombudsman Service (FOS). Within this paper, the FCA proposes to extend the jurisdiction of the FOS to enable complaints against receiving payment service providers.

Authorised push payment fraud (or “APP fraud”) occurs when a payer is deceived into making an electronic payment from their own account into an account controlled by a fraudster. It differs from other types of fraud because the payer authorises the payment. The FCA and the FOS have identified APP fraud as a growing problem, citing data from UK Finance showing that there were 43,875 cases of APP in 2017, with total losses of £236 million.

Currently, eligible complainants (for example, consumers, microenterprises smaller charities and smaller trusts) who are victims of APP fraud can make a complaint to the FOS regarding their own payment services provider (i.e. the bank or building society from which the payment was made). Complaints are typically referred to the FOS if the eligible complainant is unhappy with the response it has received from its payment service provider, or has not received a response at all.

There are limited circumstances where the FOS can consider complaints against third parties (i.e. where the complainant and the respondent do not have a direct relationship). Currently, the FOS cannot currently consider complaints by payers made against payment services providers who receive their payments.

The FCA also highlights that receiving payment service providers currently have an obligation under Regulation 90(3) of the Payment Services Regulations 2017 to cooperate in efforts by the payer’s payment service provider to recover the funds where incorrect payment details have been provided (in particular by providing to the payer’s payment service provider all relevant information for the collection of funds).

The FCA is therefore proposing to widen the jurisdiction of the FOS by allowing eligible complainants to refer complaints to the FOS if they believe the payment service provider who received a payment either:

• failed to adhere to its obligations under Regulation 90(3) of the Payment Services Regulations or
  
  
• did not do enough to prevent, or to respond to and alleged APP fraud.

Proposed definition of APP fraud

The proposed Glossary definition for “authorised push payment fraud”  is wide and intended to capture both “impersonation” (for example, where the payer intended to transfer funds to a particular individual but was deceived into transferring funds to a different person or organisation) and “purchase” (where a payer transferred funds to another person or organisation for what they believe were legitimate purposes, but were, in fact, fraudulent).

Rule changes

The FCA is proposing amendments to its Dispute Resolution: Complaints sourcebook (DISP) to extend the jurisdiction of the FOS.

The FCA has proposed that the FOS will be able to consider complaints concerning an alleged failure to co-operate as required by the Payment Services Regulations where the receiving payment service provider’s act or omission occurred after 13 January 2018. The right to complain that the receiving payment service provider did not do enough to prevent, or respond to, an alleged APP fraud is proposed to take affect from 1 January 2019.

The FCA is asking for all responses to CP 18/16 to be received by 26 September 2018.

If you require further information please contact Jessica Reed or your usual contact at the firm on +44 (0)20 3375 7000.

This publication is a general summary of the law. The law and rates of tax referred to are correct at June 2018. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, July 2018