Victims are losing more to bank transfer scams every hour than the average UK worker earns a year, according to the consumer rights campaign body Which?. It calls on UK Government to act on its commitment to legislate for mandatory reimbursement of victims.
A voluntary reimbursement code on bank transfer scams, also known as authorised push payment fraud (APP), was introduced in May 2019, and most major banks have signed up. It instructs them to reimburse all customers who are not at fault, besides provide them with support.
However, from UK Finance figures Which? notes that between July 2019 and the end of June 2021 a total of £854m was lost across 306,573 cases of APP fraud, and only 42 per cent of losses was returned to the customer.
As a result, £495m has not been reimbursed, meaning customers have been left to shoulder net losses at a rate of £4.7m a week; £676,881 a day, or £28,203 a hour. This compares with the average UK employee earning in a year of £25,971.
Which? points to the large numbers of scams, and the sums of money being lost, and adds that systemic issues with protections for this type of crime remain. In one example, a Santander customer in his 80s was left more than £3,600 out of pocket after falling victim to an impersonation scam on WhatsApp. The scammer posed as his son on the messaging service before tricking the victim into transferring money to an account to supposedly help pay for a bill.
The bank initially refused to make any reimbursement after weeks of investigating the case. After Which? helped the victim write a complaint letter, the bank agreed to give a full refund.
Which? has seen a rise in WhatsApp scams, also known as the ‘mum and dad scam’, where fraudsters pose as family members to manipulate victims into transferring money. Which? found that one in five social media scams reported to its scam sharer tool between March 2021 and January 2022 involved WhatsApp.
Since Which? launched a super-complaint back in 2016, it has been calling for the regulator and the banks to introduce a fair system of reimbursement for victims of bank transfer scams. Losses from APP fraud have risen year on year, and despite a voluntary approach providing a level of protection for some consumers, the Lending Standards Board and Financial Ombudsman Service have also repeatedly found issues with inconsistent and unfair treatment of victims. Which? is also calling on the Payment Systems Regulator to ensure it is ready once legislation is passed and set out a direction for how it will finally reduce victims’ financial harm.
Rocio Concha, Which? Director of Policy and Advocacy, said: “Despite huge sums being lost to bank transfer scams on an hourly basis, low reimbursement rates based on inconsistent and unfair decisions by banks demonstrate how the voluntary code isn’t providing the safeguards promised to victims.
“While commitments to make reimbursement mandatory were a huge win for consumers, it’s vital that the government introduces the right legislation that will ensure victims get fair and consistent treatment. The regulator must also ensure it is ready to introduce and enforce mandatory reimbursement rules the moment that this legislation is passed.”
Comment
Amir Nooriala, Chief Commercial Officer at Callsign, said: “The government needs to act urgently on its commitment to create mandatory legislation for reimbursing victims. For preventative measures to be as effective as possible, businesses must be equipped with the capabilities to help them understand the authorised push payment (APP) scams that target their customers. Organisations such as the Payment Services Regulator (PSR) must work with payment service providers to improve their ability to detect and classify APP scams.
“There must also be a standardised definition of ‘exercised sufficient caution’ and guidance on the evidence that a payment service provider needs to share so consumers are protected in the best way possible. This includes demonstrating that the service provider themselves has presented effective warnings, which are relevant, timely, and contextual to the user journey.
“However, the issue goes beyond this. It’s not just about reimbursing victims after they’ve been attacked by fraudsters – it’s about stopping the fraud from happening in the first place, and better solutions are needed to achieve this. Instead of identifying bad actors, we need to positively identify genuine users through technologies such as behavioural biometrics.
“Behavioural biometrics relies on factors that are unique to the user – how they swipe, type, or hold a device – and is a method that is extremely difficult to circumvent. What’s more, it is inclusive for all businesses and can be gathered from almost every device on the market. It’s time for the government to step up and protect consumers – but by stopping fraud, not paying people back after they’ve been scammed.”
