*The notes below may differ from those delivered on the day*

The LSB is the UK’s primary non-statutory regulator for the financial services sector. Our focus is on making sure firms across the sector are always focused on delivering the right outcomes for their consumer or business customers when they are providing products and services. We look out for emerging risks and new areas of harm that might affect consumers or businesses, and we are proactive in developing pioneering standards that will tackle these.

One of the reasons I’ve been asked to speak today is because what’s covered by this panel sits squarely within our remit: tackling fraud and making sure SMEs’ unique needs are catered for by banks and lenders. For the past five years, we’ve overseen the Contingent Reimbursement Model Code – or CRM Code – for Authorised Push Payment fraud (known as APP fraud). This Code requires its signatory firms to put in place APP fraud prevention and detection measures, and to reimburse victims of APP fraud when they’ve lost money through no fault of their own. This code covers consumers and micro-enterprises – I’ll talk more about this shortly.

We also oversee the Standards of Lending Practice for business customers, which are the only regulatory protections of their kind for UK SMEs. Through our work, we see the pernicious impact of APP fraud on SMEs and the risk of lumping SMEs in with personal consumers – which is something that happens too often. As many of you will know, SMEs have your own unique challenges – it’s important that banks and lenders consider these.

In the next few minutes, I’m going to talk about the prevalence of APP fraud for businesses, the consequences it can have, and some of the steps businesses can take to prevent APP fraud from occurring.

APP fraud statistics

I thought it would be helpful to start by highlighting some of the latest data around Authorised Push Payment fraud. This is the type of scam where a fraudster will trick someone into making a payment to them – usually by pretending to be someone that the person making the payment should trust: another business, their bank, or even their own colleagues. I’m sure you all know someone who’s had a text supposedly from a relative asking for money – or you’ve had examples at work where a supplier website has turned out to a fake, or you’ve had to deal with fake invoices that look just like something you were expecting to receive from a real company.

As you might expect, there are far fewer APP scams involving businesses than ordinary consumers – there were around 8,000 cases involving businesses last year, and 225,000 involving ordinary consumers. But, in general, the APP fraud picture is less positive for businesses than it is for consumers. Whereas the amount lost to these scams by consumers has fallen over the last three years – from £500m to £375m – the amount lost by businesses has gone up over the same period, from £77m to £83m.

And businesses also tend to see less money reimbursed by their Payment Services Provider after a scam: for businesses falling victim to APP fraud, the reimbursement rate was the same in 2023 as it was in 2020 – 37%. By contrast, the reimbursement rate for consumers climbed from 47% to 68% over the same period. And for customers covered by the CRM Code’s protections, reimbursement rates have risen from 47% to 73%.

Businesses are more likely to see more money stolen in an APP scam too – and the amount stolen per case isn’t falling for businesses in the same way it is for consumers. In 2020, personal consumers lost an average £2,400 per APP scam – that’s now £1,700. In 2020, businesses lost £7,800 per scam – that’s now £10,800.

There are some key lessons here.

One of these is the importance of prevention and taking every step possible to stop scams from happening in the first place – these steps can include looking for industry protections, or improving internal processes and building awareness of scams within your teams. The CRM Code, which we oversee, places requirements on registered firms to take steps to put prevention and detection measures in place. One of the reasons for the lower reimbursement rate for businesses might be that businesses may be more likely to use a Payment Service Provider not signed up to the CRM Code – particularly given the growing importance of challenger or neo-banks in the SME space. Businesses might also simply be too big to be covered by the Code. Evidence suggests that fraudsters go out of their way to target customers at Payment Service Providers who aren’t signed up to the CRM Code. It’s really important that businesses check what sort of independent protections any finance or payment service provider is offering to them, or to other customers. The evidence shows that independent oversight does make a difference to outcomes, so do check whether a Payment Service Provider is signed up to the CRM Code.

The other reason for the lower reimbursement rate for businesses is that they may find it harder to qualify for reimbursements. When the Code applies, reimbursements are usually required where a customer has lost money through no fault of their own; outside the Code, Payment Service Providers may consider reimbursements on their own terms. Unfortunately, from a business perspective, you may be deemed to be more sophisticated than ordinary consumers – you will be expected to have anti-fraud processes in place. As such, Payment Service Providers may have an expectation that business customers should have been able to spot a scam.

Making sure your internal systems are up to scratch, so you can prove you took all the necessary steps to check a payment was legitimate, will make it harder for a Payment Service Provider to reject a reimbursement claim.

The New Framework

From this autumn, the CRM Code will be replaced with a new statutory framework for APP fraud reimbursement, overseen by the Payment Systems Regulator. The PSR’s framework will require all Payment Service Providers to reimburse eligible customers when they’ve fallen victim to APP fraud through no fault of their own. The new framework will cover the same customer groups as the CRM Code – consumers, charities and microenterprises. But, importantly, the new framework does not place any requirements onto Payment Service Providers regarding prevention and detection of scams. With Payment Service Providers potentially less focused on prevention, it will be more important than ever for businesses to take your own anti-fraud measures seriously.

Tackling Fraud

There are lots of factors that can increase a business’ vulnerability to a scam – whether it’s your processes or your people, or the particular situation your business might find itself in. It’s important that businesses are on the look-out for factors that can increase vulnerability. And it’s important that businesses understand how they might be taken advantage of. Scammers look to exploit emotions; they take advantage of authority and trust; and they rely on creating a sense of urgency. Taking the emotion out of decisions, questioning authority, and slowing things down can help.

Scammers also rely on the cognitive blind spots that can exist around scams and fraud. Too often, we come across situations where a director or a consumer is vulnerable to a scam because they didn’t think of themselves as being the sort of person who would fall victim to one. Anyone – or any business – can be a victim of a scam. Losses from APP fraud can, in turn, cause businesses to become vulnerable. There are plenty of examples of situations where the financial hole created by fraud can lead to a business having problems making debt repayments or covering running costs. Fraud can also cause emotional distress within your own teams, even if the wider financial consequences are limited.

In the absence of higher reimbursement rates for businesses, the emphasis on prevention is vital.

What Other Protections Are There?

As we can see from the APP fraud data and, as I’m sure will be the case, from your own experience, there are big differences in the fraud experience between ordinary consumers and businesses. This makes it all the more important that there are protections in place specifically for businesses.

As I mentioned, as well as the CRM Code, we oversee the Standards of Lending for business customers, which are the only lending protections specifically designed for businesses. Among other things, the Standards include requirements for lenders about how they handle vulnerable customers – including those who might have been victim of a fraud, for example. The Financial Ombudsman Service will also assess complaints about firms against the commitments they’ve made through the Standards.

So, as a final message, I would say: making sure your lenders are signed up to the Standards is a small – but important – step you can take as part of your anti-fraud preparations.

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Against this backdrop, we’ve been encouraged to see the commitment displayed by our registered firms to tackling challenges and addressing emerging customer risks. To support this work, we’ve continued to share insights, considerations and guidance with firms as they aim to provide their customers with fair outcomes. In this post, we are bringing together a year of insights into one place.

How to stop customers from creeping into difficulty

The impact of the cost of living crisis has been saturating news feeds for some time now, and it has naturally been a keen area of focus for the LSB. As financial services firms continue to support personal customers and SMEs in financial difficulty, we’ve been exploring a new wave of customers who are at risk of falling into difficulty for possibly the first time. The challenge for firms has been how to identify those who are slowly creeping into difficulty where data may not paint a true picture of their struggles, and how to engage those customers when they may be experiencing barriers to reaching out for help.

To support registered firms with identifying and engaging their customers through financial difficulty, we have written about how firms can utilise available data to monitor trends and patterns that could help to spot those falling into difficulty, such as looking at changes in spending habits – the use of credit for essential goods, like groceries, for example. We also provided insights on how to raise awareness of potential customer struggles among staff so they can better spot the signs of financial difficulty, and how proactive engagement can empower customers to have choice in finding the right resolution with repayments. Read more in our piece on The Creep here.

Meanwhile, our Compliance team carried out a piece of work looking at our registered firms’ vulnerability practices and processes across personal and business lending, as well as the scams space for firms signed up to our CRM Code. This review ensured we have a full picture of how firms are treating their vulnerable customers across the whole lending journey. We identified areas of good practice which were shared in a report, as well as areas of improvement and considerations for strengthening support for customers in difficulty. Read the full summary report here.

One area of improvement drawn out in the vulnerability summary report was the use of Quality Assurance (QA) as a tool to monitor customer outcomes. We found QA was often narrowly focused on processes and procedures for the identification of vulnerabilities, rather than the use of soft skills. This risks not identifying when staff miss vulnerability triggers, aren’t empathetic, or carry out the necessary probing skills needed to fully understand the customer’s situation. To ensure registered firms know how to make the most of QA to identify what is and isn’t working well and achieving a fair outcome for customers, as well as  identifying areas of improvement, we released an exclusive report for registered firms which broke down the different elements of QA. From coaching and developing staff on what good looks like, to balancing how many QA checks to carry out versus the quality of the data being received as a result, registered firms can read the full piece here.

Prevention over cure

Elsewhere in the scams space, our drive to provide greater protections for customers from Authorised Push Payment (APP) fraud did not slow down over the last year. A focus on prevention and aftercare to prevent repeat fraud is just as, if not more, important than financial reimbursement, because of the emotional distress and damage that is caused by being scammed, and which cannot be undone by reimbursement alone. To that end, after making further updates to the Code, which included requirements for CRM Code signatory firms receiving scam payments to play a greater role in stopping fraudulent transactions, we held a roundtable for CRM Code signatories to share guidance on the updates, as well as further insights on preventing scams from occurring.

As well as scam prevention, we also shared insights on aftercare provided by banks and lenders following a successful scam. Aftercare, Not an Afterthought looked at the positioning and emphasis on scam education and support following a scam, to ensure customers don’t become repeat victims. 

Meeting customers’ needs: inclusion and sustainability

Against the backdrop of rising cost of living challenges, the persistence of scammers, and, of course, the evolution of financial services as Artificial Intelligence and digital products become the new norm, there’s never been a more important time for banks and lenders to ensure their customer base can access the services they need, regardless of their circumstances or preferences.

To that end, we have carried out a series of research projects on financial inclusion to better understand the barriers that customers face when trying to access banking and lending services. The first project launched in 2022, where we shone a spotlight on access for disabled business owners and those with other access needs, identifying existing barriers and producing a report to outline how banks and lenders can work to break down those barriers. Following the success of that project, over the last business year we have conducted two further pieces of research, focusing on access for d/Deaf customers in banking and credit, and increasing access to finance for ethnic minority-led businesses.

Our research in all of these areas found risks of financial exclusion. We worked with experts by experience, charity and consumer group representatives, and other stakeholders, to produce two groundbreaking reports which were designed to support banks and lenders break down the barriers faced by their customers. This included practical considerations on accessible communications, using champions to empower customers, the importance of signposting, ensuring recruitment is inclusive, and utilising lived experience experts throughout the design and delivery of services.

We have already seen banks and lenders take action as a result of these reports. Our follow up report to our research on access for d/Deaf customers in banking and credit, highlights the improvements that have been made across our registered firms to be more inclusive for customers affected by hearing loss, including improved availability of British Sign Language services. This is a positive start and will continue to be a key area of focus for the LSB into this year and beyond. Meanwhile, the LSB’s recent business Standards consultation identified the need for further guidance on how registered firms support business customers through digital channels, as well as guidance for firms on inclusive lending to SMEs.

When thinking about meeting customers’ needs, firms must also consider the wider environment and the external pressures on individuals and businesses. A prime example of this is the intensifying efforts to transition to net zero. Our business Standards review identified green finance as an area where additional guidance would benefit banks and lenders in supporting their customers. Our initial report on this topic provided high-level guidance for firms on how they can use the business Standards to maintain a customer-centric approach when developing green finance products. Firms can expect to see further insights and guidance in this space over the coming year.

Training on the challenges raised above is available for banks and lenders. Get in touch with our Insight team if you’d like to discuss your firm’s training needs. You can find out more here.

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The business Standards, overseen by the Lending Standards Board (LSB), set the best practice benchmark for SME lending in the UK, and are the only lending protections of their kind for many UK SMEs. The Standards are formally recognised and endorsed by the Financial Conduct Authority because of the absence of alternative regulatory protections for SME finance.

Ipsum Capital works in partnership with SMEs across the UK, providing liquidity solutions to commercial lenders through the purchase of non-performing loan portfolios. It also serves as a custodian of commercial mortgages and loans to UK SMEs.

Ipsum’s full registration to the business Standards follows a 15-month interim registration process, during which the firm worked closely with the LSB to meet the requirements for full registration. Today’s move to full registration signals Ipsum’s commitment to the highest standard of treatment for its SME customers amid a challenging economic climate.

Richard Marlow, Director at Ipsum Capital, comments: “We have always prided ourselves on attaining the highest standards and delivering the best possible outcomes for our customers, so achieving full registration to the LSB’s business Standards was a natural next step for Ipsum Capital.

“The path to registration was a thought-provoking period which galvanised our management team and led to our policies and processes being examined, re-engineered where necessary, and fully documented so we could achieve the best practice model.

“We are passionate about supporting our business customers and offering the fairest outcomes in what is a particularly difficult time for many SMEs in the UK. Our adherence to the Standards provides our SME customers with material assurance of our ability to achieve the right outcomes for them.”

Emma Lovell, LSB Chief Execuitve, says: “The business Standards play an unmatched role in extending protections to the UK’s vital SME community who would otherwise be at increased risk of harm when using financial products and services. The are the only regulatory protections available for many SMEs.

“SMEs should always check their finance provider is LSB registered if they want to make sure they have access to independent lending protections.”

Approximately 2.5mn businesses (with revenues up to £25mn) plan to borrow more than £25k in the next 12 months. These businesses won’t be protected by the FCA, but will be covered by the business Standards if their financial services provider is registered.

According to the latest British Business Bank and Bank of England data, challenger and specialist banks accounted for 59% of total gross SME lending in 2023 – the third consecutive year in which challenger and specialist banks’ lending share exceeded that of the big five banks.

More information on the Standards can be found here.

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In the UK, one in five adults are deaf, have hearing loss, or tinnitus. Hearing loss affects more than 40% of people over 50 years old and 70% of people over 70. The LSB’s 2023 research and accompanying report highlighted the challenges deaf people face when accessing financial services.

The LSB’s latest report coincides with UK Deaf Awareness Week (6-12 May), and includes research, carried out in conjunction with SigningBanks.UK, a new website, launched today, designed to enhance the experience of deaf people when engaging with banks and lenders. The report reveals that, among the LSB’s registered firms, progress has been made in almost all of the seven key deaf accessibility services highlighted last year. Particular improvements have been seen in:

• The availability of remote-access British Sign Language (BSL), which is now offered by 73% of surveyed registered firms, up from 55% in 2023
• Access to lip speaker services increasing from being available at 36% of surveyed registered firms to 45%
• The availability of note takers, rising from being offered at just 9% of surveyed registered firms in 2023 to 45% in 2024
• Enhancements to firms’ digital services, with online BSL translation available through 18% of surveyed registered firms in 2024, up from 9% in 2023.

Emma Lovell, Chief Executive of the Lending Standards Board said: “With around 12 million people in the UK experiencing hearing loss, it’s encouraging to see progress being made across the financial services sector to break down the barriers that many deaf people face when dealing with their banks and lenders. Our report put the experiences of deaf people front-and-centre, and it’s inspiring to see their lived experience make a difference in the sector.

“While it’s positive that new services are being introduced, there is still further to go and some accessibility services remain far from universal. Even when new services are introduced, it’s crucial that financial services firms’ team members are aware of these services and are equipped to support customers to use them. We hope to see the positive momentum from the last 12 months continue, with firms actively raising industry standards and contributing to an inclusive financial services sector for the deaf community.”

The progress highlighted in the LSB’s report can also be seen in the wider sector, with additional data from SigningBanks.UK showing improvements made by firms in the last six months alone. BSL availability – both in-person and digitally – has improved, with 70% of SigningBanks’ partners now offering BSL interpreters by request (up from 60% in December 2023). Further progress is also underway, with 93% of SigningBanks’ partners planning to offer digital BSL through telephony in the next few months.

Read the report here.

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London, 4 April 2024: The Lending Standards Board (LSB) has added a wealth of policy and governance expertise to its Board with the Non-Executive Director appointments of charity sector leader Caron Bradshaw, broadcaster Iain Dale, and economist Paul Johnson.

From 1 April, Caron, Iain and Paul have replaced Liz Barclay and Graham Peacop who have both served as Non-Executive Directors on the LSB’s Board since 2018 and have reached the end of their terms.

The LSB is the primary self-regulatory body for the UK financial services sector, and ensures firms are always focused on achieving fair outcomes for customers when providing services or products. The LSB’s Standards and industry codes cover 90% of UK personal lending and £120bn of lending to SMEs. Its business Standards are the only protections of their kind available to SMEs, while the Contingent Reimbursement Model Code, overseen by the LSB, has pioneered fraud protections for consumers.

Ken Scott, Chair of the LSB, comments: “We’re excited to welcome three outstanding individuals to the LSB’s Board. Their expertise in finance, consumer rights, policy, and governance will be instrumental as we continue to drive financial institutions to deliver better customer outcomes across the board. Our innovative Standards and agile approach to independent regulation enable us to address emerging customer harms and drive better outcomes. We’re committed to expanding our efforts and ensuring regulation keeps pace with the UK’s innovative financial services sector. This will allow even more customers to benefit from the protections our Standards provide.

“My thanks go to Liz and Graham for their fantastic contributions to our Board over the past few years.”

As a leading political commentator and author, Iain Dale has presented primetime shows on LBC Radio since 2010, and hosts a series of popular podcasts including ‘For the Many’, a political show co-hosted by former Home Secretary Jacqui Smith. He is a contributor across the media with regular appearances in the Daily Telegraph, Evening Standard, BBC Newsnight, and on Good Morning Britain.

Paul Johnson CBE serves as director of the Institute for Fiscal Studies (IFS), the UK’s leading economic research institute. He writes a weekly column for the Times and is a visiting professor in the UCL Policy Lab. For ten years, Paul was a member of the UK Climate Change Committee and has also served on the council of the Royal Economic Society.

Caron Bradshaw OBE has led Charity Finance Group (CFG) as Chief Executive Officer since 2010, having previously worked as Head of the Charity and Voluntary Sector at the Institute of Chartered Accountants in England and Wales (ICAEW). A trained Barrister, Caron has a wide array of experience across charity policy and professional ethics.

Commenting on his appointment, Iain Dale says: “I am delighted to join the LSB as a Non-Executive Director. Just like in media and politics, accountability is key in financial services too. I hear first-hand from my listeners the challenges they can encounter when navigating the financial landscape, and I’m looking forward to sharing these experiences with the LSB. The goal is a financial landscape that consumers, SMEs and financial service providers can navigate with confidence, anchored in trust. Together, we can work to ensure that ethical lending and consumer protection become the norm in financial services.”

Paul Johnson CBE says: “My work with the IFS has always been centred around upholding the highest possible standards of transparency, quality, and rigour in economics and social policy. It is a pleasure to be joining the LSB and be a part of shaping responsible financial standards – as well as flying the flag for building a financial landscape rooted in integrity.”

Caron Bradshaw OBE says: “I am thrilled to be joining the LSB’s Board. My work with CFG champions best practice to create a trustworthy charity sector – values that resonate deeply with the LSB’s commitment to setting high standards in financial services. I look forward to collaborating with the team to ensure fair and responsible lending, fostering trust and accountability throughout the entire financial ecosystem.”

Caron, Iain, and Paul join five other financial services experts on the LSB Board, including entrepreneur and LSB chair Ken Scott, fintech investor and advisor Mark Thompson, former head of the Financial Services Compensation Scheme Mark Neale, tech leader Debbie Forster MBE, and LSB chief executive Emma Lovell.

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When we need to borrow money – for, say, a new car, a holiday, a wedding or an unexpected cost – many of us will head over to a comparison site, or visit the website of a lender that we trust so we can access the best rates possible. Imagine for a moment if your primary thought was not ‘Where can I get the best deal?’, but ‘Where can I communicate in a way that works for me?’ The need to ask this second question is a reality for many – and it’s an automatic barrier to them being able to consider the widest possible range of finance options, and lowers their chances of accessing the best product for their needs.

While digital banking and lending has increased access to finance for many, it’s also true that it just doesn’t work for others. Websites relying on a multitude of plug-ins might be a no-go for someone who relies on a screen reader. There are people who just aren’t comfortable with technology or who can’t afford or can’t use a smartphone. There are some barriers that people without access needs might find surprising: for example, British Sign Language (BSL) doesn’t automatically translate into written English, so people who use BSL as their first language might not be able to understand written web content if a BSL translation isn’t available.

It doesn’t need to be this way.

Over the course of the last 18 months, the LSB has published a series of research papers focused on inclusion. We worked with those with lived experience to understand the barriers they face when accessing finance and how these can be overcome. Earlier this week, we brought together our registered firms to discuss what more can be done to ensure access to finance is truly inclusive.

Blessing Mutamba (Business Inclusion Programme Manager at NatWest), Beth Kume-Holland (CEO and Founder of Patchway Hub), and Rubbena Aurangzeb-Tariq (an expert in Deaf culture and communication) all shared their experience and knowledge on the work they have done to close exclusion gaps and the ways financial services firms can increase inclusion. Across the day, some themes emerged that, if addressed, would go a long way to support inclusive access for everyone, regardless of their specific situations, backgrounds or access needs.

Lived experience – When new services or products are introduced, those behind them may make assumptions and decisions in the design process with the best of intentions – but this can cause issues for the intended audiences or customers when these assumptions and decisions don’t reflect the input from those with ‘lived experience’ of what the designers are trying to address. If this happens when the product is supposed to reach or support under-served communities, it can lead to frustration and greater feelings of ostracization. Collaboration really is key – engaging the services and guidance of those with lived experience, either through lived experience panels or representative organisations, can really turn the inclusive design process around.

Evidencing the size of the issue – Complaints data is one area firms will look at when trying to evidence the size of an issue as part of their business case for change. As a result, we often hear comments from firms like, ‘We don’t receive many complaints about this, so we don’t see this as an area where there’s a problem.’ But, we often hear from representative groups that the inaccessibility of complaints processes is a challenge itself. Sometimes customers can’t make a complaint in a way that works for them (by using BSL, for example), while others may not trust a firm to resolve their complaint so decide not to lodge one. It’s important that firms avoid an over-reliance on complaints data as an indicator of the scale of a problem.

Communicating the change – While digital services can make accessing financial services harder for some people, they can also be used to support greater inclusion and access to finance too – but only when their availability is properly communicated and front-line employees are trained to help customers use them. Innovative support services can be frustratingly inaccessible when they are buried deep within websites, or when customer advisors can’t help customers find or use them.

Inclusion as a forethought – All too often, efforts to ensure a product or service is inclusive can happen partway through a design process (if they happen at all). The incorporation of a standard budget line in project documentation templates for lived experience inclusion advice and support can act as a prompt to ensure lived experience is considered right at the outset of projects. Some firms have a lived experience panel that supports all new and existing product and service design projects. 

While there is still much more to be done on inclusion, we have been pleased with the response to our reports, and the efforts being made by firms across the financial services to close the gap for those in underserved communities.

I would like to thank all our registered firms for joining us this week, with a special thanks to Blessing, Beth and Rubbena for their time and insight.

If you would like to find out more about how your organisation can support greater inclusion, you can contact us at insight@lstdb.org.uk.

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I’ve spent some years at the LSB, heading up the Insight department with a talented team to disseminate best practice insights to registered banks and lenders, bring new firms on board to raise standards of protections for customers, and to raise awareness of the importance of delivering the right outcomes for all. I’m proud to work for an organisation that champions inclusion and that aligns so closely with my personal passions and values.

In a typically male dominated industry, I’m also honoured to work alongside a strong, female executive team who drive forwards the LSB’s mission. But despite the strides the financial services industry has made in being inclusive, there are still disparities present, and it’s not just for women.

The theme of this years’ International Women’s Day is Inspiring Inclusion, something I, and the LSB, are passionate about, both for women, and also for anyone facing inequality when accessing banking and lending. To that end, we recently launched a series of three inclusion reports looking at how banks and lenders can ensure fair access to their products and services for customer groups who may face specific barriers to finance: d/Deaf customers, ethnic minority business owners, and disabled customers and those with other access needs – many of whom, of course, will be female entrepreneurs and consumers already navigating the gender barriers that can still be found in business and the financial services sector.

Within the reports (which were supported and informed by interviews with experts by experience, consumer organisations, charities, and our work with banks and lenders), we shared the barriers that are commonly faced when accessing finance, and how banks and lenders can work to break down those barriers with simple proactive steps. These include:

• ensuring that the voices of those with lived experience are heard and included from the design of a products or service, through to delivery and feedback;
• the importance of inclusive recruitment – ensuring communications are accessible for all, adverts are representative, and a fair opportunity is offered to all candidates;
• raising awareness amongst staff of the difficulties people may face, how to identify them and provide tailored support and effective signposting;
• having internal ‘champions’ who can represent customer groups or specific access needs; and, amongst other things,
• the importance of setting out success measures before a product or service goes live, in order to ensure you’re meeting your goals and can evidence that you’re providing a fair outcome for your customers.  

The insights shared, although tailored to the financial services, are relevant across most sectors, and for all customers.  We’ve been delighted to see and hear positive change come about already as a result of the reports, but the work doesn’t stop there. As an organisation, we have and will continue to review and develop our best practice Standards to ensure that banks and lenders have the frameworks and tools needed to design and deliver products that are accessible for all.

International Women’s Day serves not only as a celebration of how far we have come, but also as an important reminder for organisations and individuals to check in on themselves to ensure they are doing all they can to champion inclusion – because there is always more to be done.

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“We welcome the FCA’s plans to gather more evidence on the use of personal guarantees. We look forward to working with all stakeholders to ensure that business customers receive the right outcomes when accessing and using finance.

Through our recent review of the Standards of Lending Practice for business customers, the only regulatory protections of their kind for SMEs, we have identified some isolated areas where further guidance may be required in relation to the use of personal guarantees. We will engage with lenders and other stakeholders as we take our work forward.”

Read the output of the LSB’s business Standards review here.

The Standards of Lending Practice for business customers can be accessed here.

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Every year, around 200,000 people become victims of Authorised Push Payment (APP) fraud – a type of scam which sees people tricked into sending a payment to someone who is not who they claim to be. Fraudsters often pose as the victim’s own bank or members of their family. As with other types of scam, APP fraud can have a devastating emotional or financial impact on victims, while the money sent to the fraudster helps fund criminal activity.

Currently, customers are protected from APP fraud by the Contingent Reimbursement Model (CRM) Code, which is overseen by us, the Lending Standards Board (LSB). The Code ensures financial providers have a consistent approach to reimbursing victims of APP fraud and a consistent approach to preventing and detecting this type of fraud in the first place. Not all UK banks and lenders are signed up to the Code, but it does cover around 90% of UK APP fraud.

Since its introduction in 2019, the Code has helped improve reimbursement rates for APP fraud, while its focus on prevention and detection has helped slow the growth of this type of scam. In the year before the Code was introduced, APP fraud had almost doubled from the previous year; last year, APP fraud only grew 6%. The Financial Ombudsman Service (FOS) has also noted that it now receives more complaints from customers about APP fraud where their financial provider hasn’t signed up to the Code.

Last summer, the Payment Systems Regulator (PSR) announced it would be introducing a new, mandatory requirement for all UK Payment Service Providers to reimburse their customers who become victims of APP fraud. The PSR set out the final details of its approach just before Christmas, confirming that the new mandatory reimbursement framework will begin on 7 October 2024.

The incoming framework has some similarities to the existing Code, but there are important differences too. Some of the key features of the PSR’s proposals include…

• Banks and financial providers can choose to levy an ‘excess’ of up to £100 per claim (there is no excess fee under the CRM Code);
• There will be a maximum reimbursement level of £415,000 – this matches the FOS compensation limit and, while there is no reimbursement limit under the CRM Code, the new limit is still much higher than the average loss involved in an APP scam (£2,340 in 2022);
• All UK Payment Service Providers will be required to reimburse their customers for APP fraud losses, but there will be a ‘standard of consumer caution’ applied which could see reimbursement claims denied. Under this standard, customers might not be reimbursed if the financial provider can demonstrate the customer hasn’t been careful or cooperative enough – customers need to pay attention to warnings about suspected APP fraud attempts from their bank, they should notify their bank about the fraud in good time, they should share information about the fraud with their bank, and they should consent to fraud details being reported to the police. The PSR says failure to comply with just one of these requirements is not enough for a claim to be denied and that ‘the onus will be on the bank to prove that [the customer] acted with gross negligence.’ The exception does not apply to vulnerable customers. Banks and financial providers also have grounds to refuse a claim under the CRM Code, though they have to consider a wider range of factors before doing so.
• Reimbursement costs will be split between the customer’s financial provider and the financial provider used by the fraudster (the ‘receiving’ firm). The CRM Code also places requirements on receiving firms.

Perhaps the key difference between the Code and the new framework is the approach to prevention and detection. Although the PSR expects its reimbursement requirements to spur individual financial providers to take action on prevention and detection, there will be no binding, sector-wide obligation to do so. The Code, by contrast, covers reimbursement but also includes requirements on detection and prevention, as well as the steps financial providers need to take to support, educate, and communicate with their customers affected by APP fraud.

The focus on consistent prevention and detection in the Code is really important as it’s only by stopping APP fraud from happening in the first place that we can stop the irreversible harm it causes. After all, reimbursement might reverse some of the financial consequences of a scam, but it can’t undo the emotional impact fraud can have, it won’t get the money back from fraudsters, and it won’t necessarily repair the trust in vital services that fraud can undermine.

Moreover, the consistent approach to prevention achieved by the Code makes it easier to share information across the sector, provides equal protection to customers whichever financial provider they use, and makes it harder for fraudsters to exploit differences in approach that might otherwise exist between financial providers.

Alongside the PSR’s positive steps on mandatory reimbursement, we think it’s vital that we also build on the progress made on consistent prevention, detection and customer treatment since the introduction of the CRM Code. To make sure this progress does not fall away from October, we’ve begun work on a new Standard focused on best practice for preventing and detecting APP fraud and supporting customers affected by this type of scam. This new Standard will work alongside the new PSR framework from October 2024.

We’ll be consulting with stakeholders on this new Standard throughout the year, and you can keep track of our work here. In the meantime, the CRM Code will remain in place, delivering the consistent approach to APP fraud prevention, detection and reimbursement that it has enabled since 2019.

The post The new rules for Authorised Push Payment fraud reimbursement – and what they mean for scam prevention appeared first on LSB.

Following an industry-wide consultation, and drawing on its own compliance and research findings, the LSB will enhance its guidance on digital journeys and how SMEs apply for or access financial products online. It will also build upon its industry-leading financial inclusion work by helping banks and lenders improve the processes and procedures they have in place to support businesses and entrepreneurs with specific or unique needs.

The LSB’s business Standards set the benchmark for best practice in lending to UK small- and medium-sized enterprises (SMEs) with a turnover of up to £25mn, and provide the only protections of their kind across the lifecycle of lending products. The Standards are outcomes-focused, are formally recognised by the Financial Conduct Authority, and apply to approximately £120bn of UK business lending.

Overall, the consultation found the Standards continue to provide a good level of protection for SMEs, and identified areas of further work for the LSB to take forward, including:

• Developing further guidance to support firms’ application of the business Standards across digital channels so that business customers can receive the appropriate support regardless of how they access financial services.
• Exploring how the Standards and accompanying guidance can be updated to support firms offering sustainable products and services, particularly as the regulatory approach to green finance continues to evolve.
• Enhancing guidance on personal guarantees, having identified isolated instances where processes for reviewing guarantees could be working more effectively to ensure lenders’ information remains current, particularly where lending is repaid or there are changes at director level. Further guidance on declined applications is also planned.
• Launching guidance for lenders to promote inclusion, ensuring they consider a broad range of SMEs’ circumstances and needs throughout the product design and approval stages – helping to create products and services that work well for all.
• Carrying out exploratory work to assess how the business Standards could be extended to a wider range of products and sectors.

Laura Mahoney, the LSB’s Head of Policy and Legal, says: “SMEs are the backbone of the UK economy so it’s vital that they have the same access to fair outcomes when using financial products that consumers enjoy. The LSB’s pioneering business Standards play a key role in ensuring this happens and protecting SMEs from harm.

“The financial services industry is dynamic and constantly evolving, so keeping our Standards under review is critical to ensuring they continue to uphold our commitment to fairness and excellence in customer outcomes for businesses. This consultation evaluated emerging areas in business lending, such as the use of digital channels to deliver lending products and green finance, to ensure the Standards reflect, and are responsive to the changing economic and business environment. We’re also building on our groundbreaking work on financial inclusion, to make sure businesses get the support they need regardless of their owners’ backgrounds or specific needs.

“Our review, as well as our work over the past 12 months, has identified a number of barriers that businesses face when accessing finance – whether it’s their ability to access sustainable finance, or the challenges that ethnic minority-owned businesses can encounter when looking for new lending. We look forward to engaging with lenders and the business community on lowering these barriers and ensuring the business Standards are fit for the future – and can continue to support SMEs as they support the economy.”

Following the consultation, the LSB will also hold regular discussion forums for registered firms and industry stakeholders to discuss emerging areas for SMEs, regulatory developments, and the impact of the Standards – fostering industry-wide collaboration in business lending.

This consultation was launched in June 2023 as part of the LSB’s regular cycle of reviews. The LSB consulted with registered firms and wider industry stakeholders to understand whether the business Standards continue to set the appropriate framework of protections.

Read the full consultation response here.

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