Mandatory reimbursements for bank transfer scam victims under new plans

Impeccable fraud victims who have been tricked into transferring money to a fraudster are said to be entitled to reimbursements according to new plans.

The UK’s largest banks could also be required to publish their performance data on authorized push payment fraud (APP), the Payment Systems Regulator (PSR) said.

The UK government will make changes to include mandatory reimbursement for victims of fraud.
A PSR consultation sets out proposals and options to make reimbursement of payment fraud compulsory. Barriers have been identified in current legislation that limit the PSR’s ability to ensure that victims are compensated.

The UK Government intends to remove these obstacles so that the PSR can act as needed after the outcome of its consultation.

Which? Executive director Anabel Hoult, who previously filed a super complaint about wire transfer fraud, described the plans as “a huge win for consumers”:

“People are still losing life-changing sums of money every day, so the Treasury Department needs to get the laws in place quickly,” she said.

“Which? Has asked banks to clean up their dealings with victims of fraud. The banks must cooperate fully in the implementation of these long overdue requirements.”

In the first half of 2021, £ 355 million was lost to APP fraud, overtaking card fraud losses. Scams can be very sophisticated, with criminals posing as legitimate organizations such as banks, government agencies, or the police.

Many banks have already subscribed to a voluntary refund code that allows people to get their money back in situations where neither they nor their bank are to blame.

Prior to the implementation of the voluntary code, victims could not claim a refund because they had authorized the transaction.
However, consumer advocates have said that fraud victims often face a lottery to see if they will get their money back according to the code, with banks interpreting this in different ways. They also highlighted a lack of transparency regarding banks’ reimbursement rates.

The PSR is deliberating on proposals that will mean directing major banks and building societies to release data on their performance in relation to APP fraud, including reimbursement amounts for victims.

This group includes the AIB Group (UK), the Bank of Scotland, Barclays, the Clydesdale Bank, the Co-operative Bank, HSBC, Lloyds, the Metro Bank, Monzo, NatWest / RBS, the Nationwide Building Society, the Northern Bank , Santander, Starling Bank, TSB, Ulster Bank and Virgin Money.

TSB already has its own fraud refund guarantee and publishes their refund rate under the guarantee.

Commenting on the government’s plans, John Glen, Secretary of Commerce for the Treasury, said: “Push fraud is an escalating risk for UK customers, with increasingly sophisticated scams that can harm people’s lives.

“The government believes that corporate liability and reimbursement requirements must be clear in order to adequately protect customers.

“It is to be welcomed that the regulator for payment systems is advising on measures in this regard and helping to prevent this fraud from the outset. The government will also legislate to remove any obstacles to regulatory action as soon as possible. “

Chris Hemsley, General Manager of PSR said, “The growing problem of APP fraud has resulted in people losing horrific sums of money. More needs to be done, and while industry voluntary action has helped some victims, there are many institutions that still need to step forward and adequately protect people – including social media companies.

“The various steps we are planning will show people which banks and building societies are likely to respond correctly to fraud, and will oblige financial institutions to better identify and prevent fraud.

“We are also paving the way to make compensation compulsory for these innocent victims so that if the law changes, we can act as quickly as possible to protect the people who need it.”

Katy Worobec, chief executive of white-collar crime at UK Finance, said that the main focus of the banking industry is always to stop fraud in the first place.

She said: “Since the APP Voluntary Code was launched in 2019, thousands of customers have been reimbursed over £ 300 million.

“We agree that more needs to be done and have long called for a regulated code, backed by legislation, to ensure that consumer protection is applied consistently.”

She added: “As the PSR recognizes, other industries play a key role in the fight against fraud, which is why it is so important that the government and other sectors take coordinated action to address this national security threat. For this reason, we also believe that all fraud data should highlight the external causes of fraud such as data breaches, social media and other online platforms. “

The PSR consultation is open until January 14, 2022.

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