UK Payment Systems Regulator to Reduce APP Scam Compensation Cap to £85,000

The UK Payment Systems Regulator (PSR) is considering lowering the compensation cap for Authorized Push Payment (APP) scams.

The PSR analyzed 250,000 scam cases in 2023 and found that 18 of them resulted in losses of more than £415,000, while 411 cases of more than £85,000. The effectiveness of transaction limits for risk management is limited by the fact that high-value scams often involve multiple small transfers.

After combining the results with evidence by the industry and the Financial Conduct Authority (FCA), the Regulator is considering lowering the compensation cap from the original £415,000 to £85,000, in line with the current compensation limit of the UK's Financial Services Compensation Scheme (FSCS).

Previously, the FSCS also had a £415,000 compensation cap.

The PSR said that 99% of claims would be covered under the proposed new cap.

This adjustment has a greater impact on small businesses. The compensation limit before adjustment could have left some small businesses in financial trouble.

David Geale, Managing Director of PSR, stated: “We listened to concerns about the reimbursement limit and committed to collecting more evidence to inform our approach. As a result, we are now consulting on a limit that still covers the vast majority of authorised push payment scams and strikes the right balance. ”

The PSR will be seeking views on the compensation limit adjustments until September 18 and will decide on a final proposal at the end of September. The effective date of the new rules remains unchanged at October 7th.