United Kingdom: Consumer Protection & APP Fraud

Consumer Protection & APP Fraud

The Financial Ombudsman Service has introduced a new discretionary basis on which it may decline to consider a complaint. Under FOS instrument FOS 2026/6, titled Modernising the Redress System, in force from 1 October 2026, a new rule at DISP 3.3.4C gives the Ombudsman discretion to dismiss a complaint where the firm has already reviewed the subject matter of that complaint under applicable regulatory review standards. This is framed as a discretionary ground, not a mandatory bar: a prior satisfactory review conducted by the firm itself does not automatically prevent a customer from bringing, or the Ombudsman from considering, a complaint on the same subject matter. The Ombudsman retains the judgment to decide whether dismissal is appropriate in the circumstances of each case.

This development sits within a broader modernisation of the redress system that the Ombudsman has been consulting on and refining through 2026, and it represents an incremental procedural adjustment to how the Ombudsman manages complaint volume and avoids duplicating firm-led review processes, rather than a substantive change to the underlying rights a complainant has or the remedies available. For payment and e-money firms that have undertaken their own structured review of a systemic issue, such as a past safeguarding shortfall or a mis-selling pattern, this new discretionary ground provides a potential, though not guaranteed, basis to argue that a subsequent individual complaint covering the same ground should not be separately re-litigated through the Ombudsman process. Firms should not treat this as a reliable shield, however, since the rule explicitly preserves Ombudsman discretion rather than creating an entitlement to dismissal.

No specific development regarding APP fraud reimbursement thresholds, scope, or enforcement was identified in this cycle's research beyond the standing architecture already in place; the APP-fraud reimbursement framework itself is noted elsewhere as being carried forward via transitional provisions under the pending Financial Services and Markets Bill, which would move regulatory responsibility for it from the Payment Systems Regulator to the FCA once enacted.

Outlook

The practical impact of the new DISP 3.3.4C discretionary dismissal ground will become clearer as the Ombudsman begins applying it to live complaints from 1 October 2026 onward; whether it meaningfully reduces complaint volume for firms that have already conducted structured reviews, or whether the Ombudsman exercises its discretion narrowly, is not yet observable from this cycle's research. Firms should continue to track the progress of the Financial Services and Markets Bill through the Commons, since the APP-fraud reimbursement framework's regulatory home is set to shift from the Payment Systems Regulator to the FCA once that Bill is enacted, which is a separate but related consumer-protection architecture question.

Consumer Protection & APP Fraud

The UK's mandatory authorised push payment fraud reimbursement requirement has produced its first substantial independent outcome evidence. An evaluation conducted by Frontier Economics, published 1 July 2026, found that APP fraud losses over the Faster Payments system fell by approximately 21 percent following the requirement's introduction, indicating the reimbursement obligation is having a measurable deterrent effect on fraud incidence, not merely shifting the cost of existing fraud levels onto reimbursing institutions. This finding is corroborated by the Payment Systems Regulator's own reimbursement dashboard, which reports £249.6 million reimbursed to APP fraud victims over the trailing twelve months to 31 March 2026 via Faster Payments, giving the scheme a concrete and substantial financial footprint in its first full year of operation. Following the evaluation, the PSR has published a roadmap responding to its findings and intends to hold a formal consultation on reimbursement-scheme reforms in December 2026, signalling that the regulator sees this outcome evidence as grounds for refining scheme parameters rather than leaving the current settings unchanged.

Outlook

The December 2026 consultation is the key event to watch: it will test whether the PSR adjusts reimbursement thresholds, cost-sharing arrangements between sending and receiving payment service providers, or scope, in light of the Frontier Economics evaluation's findings on both fraud reduction and reimbursement cost.

Consumer Protection & APP Fraud

Mandatory reimbursement under PSR Specific Direction 20 returned GBP 173 million to victims of authorised push payment fraud in its first year of operation, a substantial consumer-protection outcome delivered under the mandatory reimbursement regime. Both bank and non-bank payment institutions are within scope of the reimbursement obligation, reflecting the regime's design to spread reimbursement responsibility across the payment chain rather than concentrating it solely on receiving or sending banks. A formal reimbursement-policy review is now running, examining the reimbursement cap, the cost-split arrangement between sending and receiving payment firms, and the standard-of-caution exception that can reduce or eliminate a victim's reimbursement where they are found to have acted with gross negligence, with findings due during 2026/27.

The timing of this review is notable given the parallel institutional transition of the PSR's functions into the FCA: the review's findings, due during 2026/27, will land at or around the same time as the broader institutional handover, raising the question of which authority will be responsible for implementing any recalibration of the cap, split or caution-exception parameters that the review recommends.

Outlook

The reimbursement-policy review findings, due during 2026/27, are the key event to watch, particularly whether the GBP 173 million first-year reimbursement figure and the underlying cap and split settings are judged to be functioning as intended or in need of recalibration. The institutional-transition overlap with this review timeline adds an additional layer of uncertainty over which body will own implementation of any resulting changes.

Consumer Protection & APP Fraud

The PSR's mandatory APP-fraud reimbursement regime has moved from contested policy to independently validated success. An independent Frontier Economics review, published 1 July 2026, found that Faster Payments authorised-push-payment fraud losses fell approximately 21 percent, and that £249.6 million was reimbursed to victims over the trailing twelve months under Specific Direction 20. This is the first independent third-party confirmation of the regime's net benefit since its introduction, and it materially strengthens the PSR's position heading into its next policy round.

That next round is a recalibration consultation, expected to be formally published in December 2026, addressing three specific parameters: the reimbursement cap, the split of liability between sending and receiving payment service providers, and the standard used to assess consumer caution in determining reimbursement eligibility. Notably, the PSR is not expected to lift the current £85,000 reimbursement cap in this round, which means debate is likely to concentrate on the mechanics of split and caution-standard calibration rather than on the scope or existence of the cap itself.

Structurally, it is worth noting that the mandatory reimbursement requirement applies only to payments made over Faster Payments and CHAPS; this rail-specific scope has not been extended this cycle, and any broader extension of mandatory reimbursement to other payment rails would require primary legislation as part of a wider regulatory-consolidation programme anticipated in the 2026/27 parliamentary session, rather than through PSR rule-making alone.

Outlook

The December 2026 consultation is the key scheduled event: expect the debate to center on the sending/receiving split and the consumer-caution standard, with the reimbursement cap itself expected to remain at its current level. Whether the rail-specific scope of mandatory reimbursement (currently limited to Faster Payments and CHAPS) is addressed in the wider legislative consolidation programme during the 2026/27 session is a longer-horizon structural question to watch beyond this immediate consultation cycle.

Consumer Protection & APP Fraud

The PSR's independent report (1 July 2026) found that the mandatory APP-fraud reimbursement policy delivered net benefit of £17m-£29m in year one with no evidence of bank market exit or reduced consumer vigilance. This is a direct rebuttal to the two central objections raised against the policy when it was introduced in October 2024: first, that mandatory reimbursement would push banks to reduce their exposure to retail payments provision because of the new cost burden; and second, that shifting liability toward PSPs would make customers less careful about scams because they would expect to be reimbursed regardless. The independent review finds evidence for neither effect, instead identifying a positive net economic benefit from the policy's first year of operation.

The PSR's own Q1 2026 reimbursement dashboard reinforces the review's conclusion with operational data: losses over Faster Payments fell ~21% following implementation of the reimbursement requirement, and Q1 2026 reimbursement value of £72.6m was the highest quarter since policy inception, with (88% of £316m lost since inception reimbursed). The high reimbursement rate indicates the scheme is functioning close to its design intent of returning the large majority of APP-fraud losses to victims, while the parallel fall in loss volumes suggests the policy may also be having some deterrent or behavioural effect on fraud incidence itself, distinct from its reimbursement function.

The reimbursement requirement applies across both bank and non-bank payment service providers alike, in contrast to the non-bank-specific scope of the safeguarding regime being introduced in parallel under W1b — a reminder that the PSR and FCA are calibrating separate tracks of consumer protection to different populations of providers depending on the risk each track addresses. The PSR is expected to move to a formal consultation on residual gaps in the reimbursement framework in December 2026, and the obligation itself is being carried forward into the New Payments Architecture as that migration completes by 1 July 2026.

Outlook

With both an independent review and a full quarter of dashboard data now pointing in the same direction, the mandatory reimbursement regime looks likely to be extended and refined rather than rolled back or diluted. The December 2026 consultation on residual gaps is the next formal milestone to track, alongside how the reimbursement obligation performs once carried onto the New Payments Architecture rather than the legacy Faster Payments rail it was designed around.

Consumer Protection & APP Fraud

The Payment Systems Regulator's one-year independent review of the mandatory APP-fraud reimbursement regime, carried out by Frontier Economics and published 1 July 2026, found fraud losses down by roughly £73m per year and around 35,000 fewer scams, with in-scope Faster Payments APP losses down approximately 21%. The overall reimbursement rate rose from 54% to 65%, reaching 97% for in-scope claims; 84% of claims were resolved within five days and 97% within 35 days, while claim volumes fell around 15% year-on-year. Set against these gains, the review found that 71% of surveyed victims were unaware of reimbursement protection and 49% did not attempt to claim, a persistent awareness gap that the PSR now intends to address through a formal consistency consultation expected before the end of 2026. The FCA has moved in parallel, issuing a Dear CEO letter that sets Consumer-Duty-linked expectations for anti-scam systems and controls and states that the regulator will use reimbursement data to monitor prudential and conduct issues. The obligations apply across both banks and non-bank payment and e-money institutions, though the underlying reimbursement mechanics run through the Faster Payments scheme and its participating banks and payment institutions differently depending on their role as sending or receiving firm — a distinction the PSR's own data collection is now designed to surface.

Outlook

The PSR's consistency consultation, expected before the end of 2026, will directly test whether the scheme's early fraud-reduction gains can be extended to the large minority of victims who remain unaware of, or unable to access, reimbursement. Continued FCA supervisory attention via the Dear CEO letter mechanism is likely to keep anti-scam systems and controls as a live conduct and prudential issue across both bank and non-bank payment providers through the remainder of 2026.

Consumer Protection & Fraud

No new structured findings were developed for this module in the current cycle. The gaps register records that the source register contains APP fraud reimbursement signals — including a PSR reimbursement regime update and FCA Dear CEO letter on APP fraud expectations for payment and e-money institutions — that were not developed into structured findings this cycle.

The gaps register also notes that UK banks paid GBP 173 million in APP fraud claims under the PSR regime, and that the PSR has confirmed its reimbursement model, but these items appear in the source register without the developed detail required to assert structured findings.

Outlook

No date-certain forward items are currently recorded for this module as structured findings. APP fraud reimbursement developments are flagged for development in the next research cycle.