If you’ve ever experienced fraud, it can be distressing and emotionally draining. A common scam that has been increasing in recent years is ‘Authorised Push Payment’ (APP) fraud. However new FCA codes of conduct means consumers might be more protected than they think.
What is APP fraud? What are the new FCA codes? How are consumers protected? Read this blog for more.
What is APP fraud?
‘Authorised Push Payments’ (APP) occur when fraudsters con individuals into making payments to them. Common scenarios are where you receive a call from someone pretending to be a representative of a bank and claims that there has been fraud on your account, which requires them to move money immediately. Fraudsters can also pretend to be a solicitor, builder or another individual whom you were expecting to pay soon.
The challenge with this type of fraud is that it circumvents banks existing protections, as the payment is authorised directly from the account holder and it is usually already received by the fraudster by the time they understand what has happened. Furthermore, the bank’s procedures for handling these cases are often unclear and not consistently applied.
These scams have also been increasingly more sophisticated in recent times with fraudsters using information that makes it appear legitimate, such as text chains from the bank, calling from the bank’s number or using information about the customer that only the bank would know.
What to do when you authorise a payment to a fraudster?
While in most cases you will be able to get a refund from your bank when there has been an unauthorised payment from your account, this is not always the case where you are an innocent victim of fraud, and you authorise a payment to fraudsters. TSB was the first bank to offer a guarantee that it would automatically refund all innocent customers who have been defrauded. However, this May, eight financial institutions signed a voluntary code committing to providing their customers with a remedy in exactly these types of situations.
The new code
Now payment service providers which sign up to the new code should make sure that victims of an APP scam are reimbursed.
The banks which have currently signed up and committed to implementing the code immediately are:
- HSBC (including First Direct and M&S Bank)
- Lloyds (including Halifax, Bank of Scotland, and Intelligent Finance)
- Metro Bank
- RBS (including NatWest and Ulster Bank)
- Santander (including Cahoot and Cater Allen)
- Starling Bank
What do I do if I am a victim of APP
As the code is voluntary, you should check whether your bank is a member in order to be eligible. You should also note it only applies to scams which took place on or after 28 May 2019.
If you are a victim of an APP scam then you should report the fraud to your bank immediately. There is a set of criteria in the code that banks should use to determine whether you would be able to get your money back.
The list of criteria the bank will use includes:
- the transaction must be an APP scam
- the transaction must be between GBP-denominated UK domestic accounts
- you (the payer) must be a consumer, a micro-enterprise or a small charity
- the transaction must be between the victim’s account and the first receiving account
However, a bank may choose not to reimburse a victim under the exceptions contained in the code. The main exceptions include:
- you ignored warnings given in compliance with the code
- you made the payment without a reasonable basis for believing that the transaction was legitimate
- you have been grossly negligent in making the payment
- if the victim is an entity (i.e. a micro-enterprise or small charity), it did not follow its own internal payment procedures
There is a further exception for victims which are assessed as being vulnerable to APP scams, and they should be reimbursed notwithstanding that the victim may fall within one of the exceptions above. Factors which will be taken into account to determine this include the victim’s personal circumstances, their knowledge, skills and capabilities in engaging with financial services and the (financial or non-financial) impact of the scam on the particular victim.
You can read the code here.
If you are refused a reimbursement, you would still usually be able to look to the Financial Ombudsman Service (FSO) to challenge that conclusion. However, it is likely that cases that go to the Financial Ombudsman Service will take longer to resolve.
What can you do to avoid APP scams
The Government and UK Finance recently produced this website to help prevent consumers from falling victims to APP scams. Some of the tips they recommend are:
- Just because someone knows some personal details (such as your name and address or your mother’s maiden name) doesn’t mean they are genuine.
- Banks or trusted organisations such as the police will NEVER contact you asking you to give your PIN or full password, or transfer money to another account.
- When you get an uninvited approach asking for information, always question them. Instead of giving your information, contact the company directly to check the request is genuine.
- Never automatically click on a link in an unexpected email or text.
Remember you should also report any scams to Action Fraud, who are the UK’s national reporting centre for fraud and cybercrime.
Being a victim of fraud is unpleasant and can leave you feeling vulnerable, exposed or distressed. But there are protections out there for consumers. People make mistakes and anybody can be a victim of a scam. But you should remain vigilant and question anyone who asks you to move or transfer money.