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Mandatory reimbursements for bank transfer scam victims under new plans

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Blameless scam victims who have been tricked into transferring money to a fraudster are set to be entitled to reimbursements under new plans.

The UK’s biggest banks could also be required to publish their performance data in relation to authorised push payment (APP) scams, the Payment Systems Regulator (PSR) said.

It said changes would be made by the UK Government to provide for mandatory reimbursement for scam victims.

A PSR consultation sets out proposals and options to make reimbursement for payment scams mandatory. Barriers have been identified in current legislation that limit the PSR’s ability to ensure victims are reimbursed.

The UK Government intends to remove these barriers to enable the PSR to act as needed following the outcome of its consultation.

Anabel Hoult, chief executive, of Which?, which previously made a super complaint on bank transfer scams, described the plans as “a huge win for consumers”.

She said: “People are still losing life-changing sums of money every day, so the Treasury must move swiftly towards introducing the necessary legislation.

“Which? has been calling for banks to come clean on how they treat fraud victims, so it’s positive that the PSR is planning to direct firms to publish data that shows fraud case numbers and how often they reimburse customers. The banks must cooperate fully with putting in place these long-overdue requirements.”

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

Many banks have already signed up to a voluntary reimbursement code, which enables people to get their money back in situations where neither they, nor their bank, is to blame.

Before the voluntary code was introduced, victims could not claim refunds as they had authorised the transaction.

But consumer campaigners have said scam victims often face a lottery as to whether they will get their money back under the code, with banks interpreting it in different ways. They have also highlighted a lack of transparency concerning banks’ reimbursement rates.

The PSR is consulting on proposals that would mean directing large banks and building societies to publish data on their performance in relation to APP scams, including reimbursement levels for victims.

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

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

John Glen, Economic Secretary to the Treasury, said of the Government’s plans: “Push payment fraud is posing an escalating risk to UK customers, with increasingly sophisticated scams that can be detrimental to people’s lives.

“The Government’s position is that liability and reimbursement requirements on firms need to be clear so that customers are suitably protected.

“It is welcome that the Payment Systems Regulator is consulting on measures to that end, and to help prevent these scams from happening in the first place. The Government will also legislate to address any barriers to regulatory action at the earliest opportunity.”

Chris Hemsley, managing director of the PSR, said: “The growing problem of APP scams has seen people lose devastating amounts of money. More needs to be done and, while voluntary industry measures have helped some victims, there are many institutions which have yet to step up to the mark and protect people properly – including social media firms.

“The range of steps we plan to take will show people which banks and building societies are likely to respond to frauds in the right way and will put the onus on financial institutions to get better at detecting and preventing scams.

“We are also setting out the way to make reimbursement mandatory for those blameless victims so that, when the law is changed, we are ready to act as quickly as possible to get protections to the people who need them.”

Katy Worobec, managing director of economic crime at UK Finance, said the banking industry’s primary focus is always on stopping scams happening in the first place.

She said: “Over £300 million has been reimbursed to thousands of customers since the APP voluntary code was introduced in 2019.

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

She added: “As the PSR recognises, other industries have a key role to play in tackling fraud, which is why it’s so important that there is coordinated action from Government and other sectors to tackle what is now a national security threat. It’s also why we believe any fraud data should highlight the external drivers of fraud, such as data breaches, social media and other online platforms.”

The PSR’s consultation is open until January 14 2022.

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