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New FCA rules mean complaint handling extended to ‘receiving’ payment service providers

  • United Kingdom
  • Fraud and financial crime
  • Litigation and dispute management



On 14 December 2018, the Financial Conduct Authority (“FCA”) published a policy statement (PS18/22) which introduces new rules which mean that receiving payment service providers (“PSPs”) must deal with complaints from victims of alleged Authorised Push Payment (“APP”) fraud  in the same manner as paying PSPs.   The new rules take effect on 31 January 2019.


The new rules are part of an ongoing regulatory response to a super-complaint made by the consumer rights group Which? to the FCA and Payment Systems Regulator (“PSR”) in September 2016 about the adequacy of consumer safeguards to prevent APP fraud and the protection for victims of APP fraud. They follow on from the FCA’s consultation during the third quarter of last year (CP18/16).

Complaints about APP fraud

APP fraud occurs where a customer unknowingly authorises a payment by credit transfer to an account with the receiving PSP, which is controlled by the fraudster. It is a growing issue in the United Kingdom: UK Finance data for all of 2017 show that there were 43,875 cases of APP fraud with total losses of £236 million; in the first six months of 2018 there were 34,128 cases with total losses of £145.4 million.

Under the existing rules, victims of APP fraud can complain to their own PSP, and that PSP must handle the complaint in accordance with the Dispute Resolution: Complaints sourcebook (“DISP”) and, if unhappy with the outcome, the victim can refer the issue to the FOS for adjudication. However, if the victim complains to the PSP who has received the funds, that PSP is not required to follow DISP when handling the complaint, and the victim is unable to refer the issue to the Financial Ombudsman Service (“FOS”).

The FCA’s new rules change this from the end of this month, all PSPs will be required to handle complaints about APP fraud in accordance with the DISP rules. As well, the FOS’s compulsory and voluntary jurisdiction will be extended to enable them to adjudicate on all cases where victims of APP fraud are not happy with the outcome of their complaint to a PSP -provided that the victim is an eligible complainant within the meaning of DISP, i.e. a consumer or micro-enterprise.

Complaints about cooperation between PSPs

In addition, the FCA (with immediate effect) has changed its rules on complaints about cooperation between PSPs dealing with mistaken payments. Under the Second Payment Services Directive (“PSD2”), if the payee provides incorrect account details (or other payee identification details), the receiving PSP must cooperate with the payer’s PSP to recover the funds involved in the transaction. This requirement has been implemented in the United Kingdom pursuant to regulation 90(3) of the Payment Services Regulations 2017 (“PSRs 2017”). Payees can now complain to the receiving PSP about that firm’s cooperation with the payer’s PSP in relation to the mistaken payment, and the receiving PSP must handle that complaint in accordance with the DISP rules. Such complaints will also be considered under the FOS’s compulsory and voluntary jurisdiction. This change applies to any acts or omissions from 13 January 2018, i.e. the date on which the PSRs 2017 came into force.

Measuring progress

The FCA has also published a policy statement (PS18/24) setting out new reporting requirements on complaints about alleged APP fraud and has suggested that this data could be used to measure the efficacy of these latest policy changes. 

Next steps for PSPs

PSPs should: review their procedures for dealing with APP fraud and for cooperating with other PSPs in relation to mistaken payments; ensure that they are handling complaints appropriately, promptly and fairly; and also be alive to the reporting requirements.

The FCA has commented that PSPs should already have in place appropriate systems and processes for compliance with the new requirements, given that they must already deal with complaints as sending PSPs, and has therefore given PSPs less than two months to prepare for the new rules coming into force. Notwithstanding this, PSPs should ensure that they have the resource and capacity to account for the possible increase in the volume of complaints to which they will potentially be exposed as a result of these rule changes.

PSPs who receive a complaint about APP fraud should consider how they can quickly and accurately determine whether it is they or their counterpart PSP to which the victim should be complaining. The FCA has said that it does not want customer journeys to be impacted by this rule change insofar as that journey involves complaints and dispute resolution. This may involve early cooperation with the counterpart PSP and/or the extension of the contingent reimbursement model (“CRM”) to cover complaints as well as reimbursement.

For more information on  complaint handling in relation to APP fraud or to receive a copy of our regular Payment Matters briefing on payment services in the United Kingdom and European Union, please contact us directly.