Authorized Push Payment (APP) Scams: A Growing Concern and New Protections for Victims
Financial compensation limits established for scam victims: understanding your entitlements when you've been defrauded by the bank
Authorized Push Payment (APP) scams have become one of the most common types of fraud nowadays, with victims being tricked into authorizing payments for fake goods or services. These scams often exploit psychological vulnerabilities, using social engineering tactics to build trust and create a sense of urgency.
How APP Scams Work
In an APP scam, a fraudster convinces the victim to authorize a payment, usually through online or telephone banking, to an account controlled by the scammer. Here's a typical process:
- Victim Notification: The victim may receive a notification about suspicious activity on their account, prompting them to seek assistance.
- Fraudster Involvement: The victim is contacted by someone claiming to be from their bank, providing details about the victim's account to establish credibility.
- Payment Authorization: The victim is persuaded to authorize a payment or transfer funds to a secure account to allegedly protect their money or reverse a transaction.
New Protections for Victims in the UK
Recognizing the need for stronger protections, several measures have been implemented in the UK to safeguard APP fraud victims:
- Contingent Reimbursement Model (CRM): Introduced in 2019, the CRM is a voluntary scheme that commits banks to refunding APP fraud victims who meet specific criteria. This marked a shift towards greater accountability for financial institutions.
- Mandatory Reimbursement Model: Effective from October 2024, this model will require payment service providers to reimburse eligible fraud victims, subject to certain conditions. This change strengthens protection for APP fraud victims.
- Financial Ombudsman Service (FOS): Victims can also seek redress through the FOS, a government-backed service that resolves disputes between financial institutions and customers. This provides an additional avenue for victims to claim compensation.
- Payment Services Regulations 2017: These regulations require banks to reimburse unauthorized transactions, and the updated reimbursement models extend some protections to APP fraud cases.
These developments aim to provide more robust support and reimbursement options for victims of APP scams in the UK. It's important to note that banks can still refuse to refund APP fraud victims if they believe warnings were ignored, and they may delay repayments if they think a claim is suspicious or if the account holder didn't take enough care when making payments.
Preventing APP Scams
To avoid falling victim to APP scams, consumers should be cautious about transferring money to people they don't know. Other tips include:
- Verifying the legitimacy of organisations by checking reviews and calling them back on a separate number.
- Being wary of scams and not relying on being reimbursed.
- Not rushing decisions or transferring money quickly when contacted by someone claiming to be from a bank or the police.
By staying vigilant and following these precautions, consumers can significantly reduce their risk of falling victim to APP scams.
