What you need to know about the Payment Systems Regulator's consultation into the latest initiative to tackle Authorised Push Payment fraud
On 28 September 2018, the Payment Systems Regulator (PSR) announced that it planned to consult on using its regulatory powers to give a general direction to firms to implement Confirmation of Payee (CoP). On 23 November 2018, the PSR published its consultation. Read our summary of the key points to note.
Every year, thousands of consumers and businesses are victims of Authorised Push Payment (APP) fraud. Over the past two years the industry has worked together to come up with a series of measures to help reduce the number of APP scams taking place. CoP is the latest in the long line of industry initiatives to help combat APP fraud.
With CoP, when a customer sets up a new payment, firms will be able to check the name on the account of the person or organisation being paid. Customers will then receive either (a) "yes" if the account name matches, (b) "No, please check" if a similar name to the account holder is used or (c) "No, the name is wrong" if the name entered does not have any similarity to the name of the account holder. The customer will still have the decision whether or not to proceed with the payment but the risks of proceeding will be made clear if the customer continues after receiving a non-match.
On 28 September 2018, the PSR announced that it planned to consult by December 2018 on using its regulatory powers to give a general direction to firms to implement CoP.
On 18 October 2018, Pay.UK announced in a press release that it had released to the market the standards, rules and guidance for the confirmation of payee service. On 23 November 2018, the PSR published its consultation.
1. Why directions are necessary - The PSR is considering regulatory intervention as it considers there may be limited incentives for PSPs to adopt CoP early as its use depends on the wide uptake by other PSPs. From the PSR's perspective, for CoP to be successful, it needs to be "implemented quickly and widely". The PSR is therefore considering giving general directions under the Financial Services (Banking Reform) Act 2013.
2. Timescales suggested - The PSR has proposed that those who participate in faster payments systems should be capable of (a) responding to CoP requests by 1 April 2019 and (b) sending CoP requests by 1 July 2019. The PSR has said that it has staged the proposed implementation to allow CoP to be delivered in a "safe, stable fashion".
3. Scope of the directions - The PSR recognises that the impact of CoP will depend on how widely it is adopted and implemented. It has therefore included a series of questions asking for input on the types of transactions to be covered, which PSPs the directions would apply to and what products and services would be caught.
4. Other alternatives - The PSR has said that it is happy to hear other alternatives to its proposed approach. However, it has asked that any alternatives are supported by a summary of the advantages and disadvantages and how the impact of the alternative may differ from the anticipated impact of the PSR giving the proposed directions.
5. Next steps - The consultation is open until 4 January 2019. The PSR will consider all of the responses received and, if it decides to proceed to give proposed directions, will consult further on the proposed text.
As the PSR says, many of the initiatives being proposed, not just CoP, will depend on the scope of the uptake and the co-operation by the industry. With the significant increase in new entrants to the banking market it will be an on-going challenge for the regulators and the industry to ensure that consumers are protected from APP scams and the work completed to date has as wide an impact as possible.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at November 2018. Specific advice should be sought for specific cases. For more information see our terms & conditions.