As part of new rules to better protect consumers from scams, victims of authorised push payment (APP) financial fraud could soon be guaranteed refunds from their bank.
The Payments Systems Regulator (PSR) has issued a consultation paper proposing making it mandatory for banks to reimburse victims of APP scams, in which people are tricked into transferring money to an account they believe is safe. £335m was lost to APP fraud in the first half of this year, overtaking that of card fraud, according to the PSR.
In May 2019, UK banks agreed to a voluntary code that stated victims of APP scams should be refunded unless they ignored their bank’s warnings about the scam or were ‘grossly negligent’ in transferring the money. The PSR now wants to go further following an uptick in APP scams.
To better protect customers, the PSR is proposing that:
- It becomes mandatory for banks to reimburse APP scam victims. The current rules mean the level of consumer protection differs from bank to bank. It isn’t yet clear how these proposals will work, should they be enforced, but that will be decided as and when legislative changes are made. All banks and building societies will be subject to the new rules.
- UK banks must publish data on APP scams. The data would include information on performance concerning APP scams, compensation levels for victims, and which banks and building societies’ accounts are being used to receive fraudulent funds.
Banks that would need to publish data include: AIB Group (UK), Bank of Scotland, Barclays, HSBC, Lloyds, Metro, Monzo, Natwest/RBS, Nationwide Building Society, Santander, Starling, TSB, Ulster Bank and Virgin Money.
- Improve scam prevention. The PSR says the financial industry should extend intelligence sharing so that APP scams can be detected and prevented more quickly and easily. This, it believes, would help prevent customers from falling victim in the first place.
The consultation will end on 14 January 2022.
How Govt, PSR and UK Finance have responded
John Glen, Economic Secretary to the Treasury, says the Government’s stance is that the liability and reimbursement terms of financial institutions need to be transparent so that customers are appropriately protected. He welcomes the fact that the Payment Systems Regulator is consulting on these measures for that reason, to help prevent scams occurring. The Government will also bring in legislation to remove any barriers to regulatory action as soon as possible, he says.
Chris Hemsley, MD of the PSR, states that the growing problem of APP scams has resulted in people losing devastating amounts of money. He believes more needs to be done and although voluntary industry codes have helped some victims, there are many institutions which are not yet behaving responsibly and protecting people properly, including social media companies.
Katy Worobec, MD of Economic Crime at UK Finance, speaking on behalf of banks, says as the PSR acknowledges, other industries also have a critical role to play in tackling fraud. This is why it’s so important, she adds, that there is co-ordinated action from the Government and other sectors to manage what is now a national security threat.
Famous names plead for Online Safety Bill to include scam ads
Fourteen trusted household names, among them Martin Lewis of moneysavingexpert.com, Sir Richard Branson of Virgin Airlines and Deborah Meaden of Dragons’ Den have signed an open letter to the PM calling for paid-for scam advertising to be included urgently in the forthcoming Online Safety Bill.
Led by Martin Lewis, the signatories of the letter have all had their names and faces used by scammers in online advertising, often thousands of times, enticing victims to join fraudulent financial schemes or buy fake health cures.
Currently, there are few effective powers to prevent scam adverts from appearing online, and regulators are unable to prosecute the large tech platforms that are paid to publish them. Some victims have lost life-changing amounts of money, even their entire life savings amounting to hundreds of thousands of pounds, merely because they trusted the reputations of those used in the adverts.
According to Action Fraud and the National Cyber Security Centre, Martin, Branson and Meaden are some of the most-used faces in online fraud.