FCA consult on complaints handling and extending the jurisdiction of the FOS for authorised push payment fraud
The FCA and Financial Ombudsman Service (FOS) have published a joint consultation paper (Consultation) on firm complaints handling and extending the jurisdiction of the FOS to include handling complaints regarding authorised push payment (APP) scams in cases where the PSP who received the APP fraud funds did not do enough to prevent the fraud, or where it failed to respond to it sufficiently.
APP fraud is where a fraudster tricks a payer to instruct their payment service provider (PSP) to send money from their account to another account held in the name of the fraudster. The difficulty for PSPs is that these transactions can be very difficult for PSPs to detect in a firm’s analytics, since they will be likely to look very similar to genuine payment instructions.
APP scams are deemed by regulators to be a growing problem, and a move towards further regulation had been expected by the industry following the Which? supercomplaint to the Payment Systems Regulator (PSR) and FCA in September 2016, alleging insufficient protections for victims of APP fraud compared with other types of fraud, and the FCA’s and PSR’s responses in November 2017 calling for the industry to do more.
Under the Consultation, firms who receive funds that are the result of APP fraud will be required to handle complaints about alleged APP fraud in line with the Dispute Resolution: Complaints (DISP) sourcebook in the FCA Handbook. Eligible complainants would also be able to refer their complaints against such PSPs to the FOS if they are unhappy with the outcome reached by the PSP, or if the PSP has failed to respond to the complaint. This will be effected through changes to the FOS’ compulsory jurisdiction and voluntary jurisdiction. The Consultation proposes the date after which acts or omissions might be caught under the new broader scope of the FOS would be 1 January 2019.
The Consultation also proposes to amend the FOS’ jurisdiction to capture complaints about cooperation between PSPs when the account details provided about the payee are incorrect and where there is a complaint between a payment service user and a PSP about a PSP’s obligations under Titles III and IV of PSD2. Since these changes are being implemented to transpose provisions of the second payment services directive (PSD2), the Consultation proposes that acts or omissions after 13 January 2018 would be eligible for such a referral, to mirror PSD2’s implementation date.
The PSR, for its part, consulted on introducing a voluntary contingent reimbursement model code for the industry in November 2017, which set out a number of scenarios under which APP scam victims would be entitled to reimbursement. The code is to be developed between industry and consumer representatives, with a public consultation expected in September 2018.
The Consultation is open until 26 September 2018, with resulting rules to be published in due course.
Michael McKee has over 20 years’ experience in the financial services sector having practised at major international law firms in London.