On 9 May 2019 the Payment Systems Regulator (PSR) published a consultation on giving a specific direction for the implementation of Confirmation of Payee (CoP). CoP is a name-checking service that has been identified by the PSR and the payments industry as an important tool to help prevent Authorised Push Payment (APP) scams and accidentally missed directed payments.
How does CoP work?
CoP is an industry-agreed way of ensuring that names of payment recipients are checked before payments are sent. It will work by checking whether the name of the account that a payer is sending money to matches the name they have entered. Alerts will notify the payer when there has not been a match, meaning corrections can be made before the payment is made.
The architectural design for CoP was created, consulted on and agreed by the Payments Strategy Forum. Pay.UK took over the delivery of the CoP rules and standards, in collaboration with payment service providers (PSPs) and other relevant stakeholders. Pay.UK has developed CoP rules and standards for 'phase one', which covers account servicing PSPs that operate in the UK and have their own unique addressable sort code. Pay.UK is still setting the scope of 'phase two' of CoP.
How will CoP be rolled out?
The PSR consulted on the implementation of CoP in November 2018 and proposed giving a direction mandating that all PSPs be capable of receiving and responding to CoP requests by 1 April 2019 and sending CoP requests by 1 July 2019. A strong majority of respondents supported the PSR direction, but raised issues concerning the scope and design of the proposal, with the key issues raised being difficulties in meeting implementation deadlines, the impact on different types of PSPs (particularly small PSPs) and the need to clarify rules and standards on CoP.
In light of the feedback, the PSR is now proposing a direction requiring the PSPs in the six largest banking groups that offer their UK account holders access to the Faster Payments Scheme and CHAPS to implement CoP. The six largest groups are identified as the Lloyds Group, Barclays Group, HSBC Group, Royal Bank of Scotland Group, Santander Group and Nationwide Building Society.
Under the proposed direction, all PSPs in the six specified groups must be capable of receiving and responding to CoP requests by 1 December 2019 and sending CoP requests and presenting their responses to their customers by 31 March 2020. The proposed direction covers transactions that start at and end at UK-based accounts and that happen exclusively over the Faster Payments Scheme or CHAPS. Such PSPs will be required to use the CoP rules and standards developed by Pay.UK.
If the PSR decides to proceed with the proposed direction, it plans to do so by the end of July 2019.
APP voluntary code
CoP is one tool to help prevent APP scams. The APP Scams Steering Group, established by the PSR, has also published a voluntary code of good practice which aims to better protect customers and reduce the occurrence of APP fraud. The code became effective on 28 May 2019 and sets out the agreed principles for greater protection of consumers and the circumstances in which they will be reimbursed.
The majority of the leading high street banks and building societies have signed up to the code, and the protections are available to individuals and micro-businesses, as well as small charities. The code delivers a commitment from all firms who sign up to it to reimburse victims of APP fraud if the firm has failed to meet the standards set out in the code, provided the customer did everything expected of them under the code. PSPs that sign up to the code commit to:
- protecting their customers, including procedures to detect, prevent and respond to APP fraud, with a greater level of protection for customers considered to be vulnerable to this type of fraud; and
- preventing accounts from being used to launder the proceeds of APP fraud, including procedures to prevent, detect and respond to the receipt of funds from this type of fraud.
The customer will also be reimbursed where both the customer and the PSP have met their expected level of care (the so-called 'no-blame' scenario). The industry has committed to provide initial funding for these 'no blame' situations until the end of 2019, whilst the long-term funding arrangements are still being agreed.