APP fraud reimbursement review: what the PSR’s first independent evaluation will engage
In short: The APP fraud reimbursement review is now running, with findings due during 2026/27. Mandatory reimbursement under Specific Direction 20 returned £173 million to victims in its first year. The £85,000 cap, the 50/50 split between sending and receiving payment service providers, and the consumer-caution exception are all on the table for recalibration.
If a fraudster tricks a customer of a UK bank or payment firm into authorising a Faster Payments transfer, the bank has to pay the money back, up to £85,000 per claim. The Payment Systems Regulator brought that obligation in on 7 October 2024 under Specific Direction 20, made under section 103A of the Financial Services (Banking Reform) Act 2013. An independent review of how the regime has worked in its first year began in October 2025, and findings are due during 2026/27. The review will test whether the £85,000 cap, the 50/50 split between sending and receiving payment service providers, and the consumer-caution exception need recalibrating.
Specific Direction 20 and section 103A of FSBRA 2013
The APP fraud reimbursement review takes Specific Direction 20 as the instrument under examination. Specific Direction 20 binds payment service providers participating in the Faster Payments scheme. Section 103A of the Financial Services (Banking Reform) Act 2013, inserted by section 72 of the Financial Services and Markets Act 2023, gives the PSR a specific power to require reimbursement. The PSR confirmed the £85,000 maximum in PS24/7 in October 2024, having reduced it from the £415,000 originally proposed in PS23/4, the December 2023 final-decision policy statement. The CHAPS regime sits alongside under PS24/5, with the Bank of England, as CHAPS operator, aligning the cap at £85,000.
The Faster Payments reimbursement obligation falls on both the sending PSP, which executed the payment from the victim’s account, and the receiving PSP, which holds the destination account. Liability is split 50/50. The sending PSP reimburses the victim within five business days in the normal case, and 35 business days where the case is complex, then claims the receiving PSP’s half through the inter-PSP recovery mechanism in the Faster Payments scheme rules. Pay.UK administers the operational layer. The PSR consolidated the policy framework into PS25/5 in May 2025. Disputes route to the Financial Ombudsman Service under FSMA 2000 Part XVI.
What the APP fraud reimbursement review is likely to engage
The independent review will not unwind the regime. It will test whether the calibration set in PS24/7 and PS25/5 has worked in practice and where the rules need adjusting. Three issues sit at the centre.
The first is the £85,000 cap. Year-one PSR data shows that mandatory reimbursement covered 88% of money lost to APP scams, with £173 million returned to victims, and that 99.8% of Faster Payments APP scams by volume fall fully within the cap. The cap is therefore an upper-tail constraint, affecting a small share of claims by volume but a more substantial share by value. Around 10% of total losses sit above the cap. The review will weigh whether to lift the cap, leave it, or differentiate it by victim type.
The second is the consumer-caution exception. The exception lets a PSP decline reimbursement where the customer was grossly negligent in making the payment. The PSR’s December 2023 publication on the consumer standard of caution requires PSPs to point to specific, directed warnings before relying on the exception, and disapplies the exception entirely for vulnerable customers. The dispute pipeline at the Financial Ombudsman Service will tell the review where the PSP-consumer line is being drawn in practice, and where the rule needs sharpening.
The third is receiving-PSP standards. The 50/50 split makes receiving PSPs share the cost. The PSR Annual Plan 2026/27 has signalled that receiving-PSP standards are likely to be consulted on in light of year-one operational data. That is a recalibration of who carries which compliance burden, not a structural reset.
Implications for sending and receiving PSPs and for non-Faster Payments rails
The APP fraud reimbursement review will land most heavily on receiving PSPs and on PSPs operating outside the Faster Payments and CHAPS perimeter. Three operational consequences flow.
Sending PSPs face a settled regime. The £85,000 cap, the five and 35 business day windows and the consumer-caution standard are unlikely to move materially. Investment in fraud detection at the point of sending and in Confirmation of Payee continues to deliver compliance value. Front-line consumer messaging, particularly directed warnings before high-risk payments, is the area most likely to feel rule changes.
Receiving PSPs face the more open question. The PSR’s signal that receiving-PSP standards may be consulted on means that the cost of mule-account detection, post-receipt monitoring and proceeds-of-fraud recall is likely to rise. Smaller payment institutions with predominantly receiving-side activity will feel this most. The 2024 dear-CEO letter to payment and e-money institutions set the FCA’s supervisory tone; the review may add specific PSR rule changes on top.
PSPs operating outside Faster Payments and CHAPS face a different question. International transfers, BACS credit, SWIFT, card-not-present and on-us payments fall outside the mandatory regime. Consumers using those rails retain the weaker pre-October 2024 protection. The review will need to address whether the regime extends to other rails, or whether the structural mismatch is left to the wider PSR FCA consolidation programme. For PSPs structuring multi-rail products, the rail-specific protection difference is a commercial design question, not just a compliance one. Our payments product, safeguarding and scheme governance guide covers the standing rail-by-rail position.
Viewpoint
The APP fraud reimbursement review will recalibrate the regime where it has misfired in operational practice, most likely on receiving-PSP standards and on the consumer-caution evidential threshold, but it will not lift the £85,000 cap and it will not extend the regime to non-Faster Payments rails in this round. The structural rail mismatch will sit with the wider PSR FCA consolidation programme, which the HM Treasury Fintech Week 2026 package confirmed will proceed by primary legislation in the 2026/27 parliamentary session. That deferral matters because consumers using card-not-present, agency banking and e-money rails retain the weaker pre-October 2024 protection in the meantime, and PSPs operating across rails are designing products around two different regulatory floors. The operational bottleneck on year-one compliance has not been the cap itself but the consumer-caution dispute pipeline at the Financial Ombudsman Service, where the application of the gross-negligence test is doing the practical work of allocating the regime’s losses.
Frequently asked questions
Who is covered by the APP fraud reimbursement regime?
Payment service providers participating in the Faster Payments scheme are bound by Specific Direction 20. Payment service providers participating in CHAPS are bound by the parallel CHAPS reimbursement regime in PS24/5, with the Bank of England as CHAPS operator. International transfers, BACS credit, SWIFT, card-not-present and on-us payments are outside the mandatory regime.
What is the maximum reimbursement amount?
£85,000 per claim. The PSR confirmed this in PS24/7 in October 2024, reducing the £415,000 cap originally proposed in PS23/4. The Bank of England, as CHAPS operator, aligned the CHAPS cap at the same level. The cap covers 99.8% of Faster Payments APP scams by volume and around 90% by value.
When can a PSP refuse to reimburse?
Reimbursement may be withheld for first-party fraud, for gross negligence under the consumer-caution exception, where civil or criminal proceedings are pending, and where a £100 consumer excess applies. The exception cannot be relied on for vulnerable customers, and the PSR requires PSPs to point to specific, directed warnings before invoking it. Disputes route to the Financial Ombudsman Service.
What is the timeline for the APP fraud reimbursement review?
The independent review of the regime began in October 2025. Findings are due during the PSR’s 2026/27 annual plan year, which runs from April 2026 to March 2027. The PSR has signalled that it will consult on receiving-PSP standards in light of the review’s findings.
For advice on how the APP fraud reimbursement review affects your firm’s payments compliance and product design across rails, contact Rob Bratby at Bratby Law.
