Banks appear to be reimbursing victims of bank transfer fraud at lower rates than expected under a new voluntary code, according to a regulator.
The Payment Systems Regulator (PSR) published notes on its website from a conference call meeting on March 30 with the regulator, banks, building societies and other organisations, to discuss the progress being made to tackle authorised push payment (APP) scams.
APP scams happen when someone is tricked into transferring money directly to a fraudster – sometimes meaning they lose huge sums of cash.
A voluntary reimbursement code was introduced last year to make it easier for fraud victims to get their money back in situations where neither they, nor their bank is to blame.
Various organisations have also raised concerns in recent weeks that criminals are using the coronavirus pandemic as a fresh opportunity to scam people into handing over money.
The PSR’s document said that 41% of losses from cases assessed under the code were reimbursed between May 28 and December 31 2019.
It said this is lower than expected, given the code presumes that customers should be reimbursed unless there are clear grounds for holding them liable.
More than half (54%) of losses came from cases involving more than £10,000 – potentially life-changing sums.
The document contained speaker’s notes attributed to the PSR’s managing director, Chris Hemsley.
The notes said: “I am very conscious that one of the unfortunate trends that we have seen with Covid-19 is that it is again providing fraudsters with an opportunity to prey on the vulnerable.
“And the data available to us suggests that there are problems with how APP fraud is currently being handled. If we do not act, these problems are at risk of getting larger, making it more difficult to resolve them. I don’t think any of us want that.”
The notes added: “I know there is continuing work to understand the impact of any remaining data issues behind these figures.
“But, if this data is a reasonable indication of what customers are experiencing, this is well below the levels of reimbursement that I was expecting.
A voluntary agreement alone is not enough and issues of liability and reimbursement would best be addressed by new legislation UK Finance spokeswoman
“After all, the code presumes that customers should be reimbursed unless there are clear grounds for holding them liable.”
Levels of reimbursement are also extremely varied across individual banks, the document suggested.
It also highlighted some feedback evidence that firms have been turning claims down based on generic warnings and cases where firms have expected customers to display a higher degree of caution or knowledge of the scam than might ordinarily be reasonable.
However the document also said it is possible that there is a problem with the data, or that there is a good explanation behind the figures.
The PSR said it will look to identify a workable solution to the concerns it has raised.
Consumer group Which? highlighted figures in the PSR’s document suggesting that as many as 96% of APP fraud cases were not reimbursed by some banks between May 2019 and February 2020, with big variations between different providers.
Gareth Shaw, head of money at Which? said: “Banks that reimburse just 4% of cases are making a mockery of the scams code, which clearly pledges to reimburse all blameless victims of bank transfer fraud.
“We want to see banks regularly publish their reimbursement figures so consumers have a better idea of how a bank may treat them if they fall victim to a scam.
“The industry has demonstrated that the voluntary approach to tackling bank transfer fraud has failed, so the time has come for the protections consumers need to be built into the payments system. If the PSR is unable to make this happen, the Government must step in.”
A spokeswoman for trade association UK Finance said: “The banking and payments industry is wholly committed to defending its customers from authorised push payment (APP) fraud and stopping stolen money going to criminals.
“The APP code, developed on a voluntary basis by the larger firms together with consumer groups, has established stronger customer protection standards and meant more victims are receiving compensation.
“However, as we have previously said a voluntary agreement alone is not enough and issues of liability and reimbursement would best be addressed by new legislation.
“Both the Government and regulators must also consider how customer data breaches and vulnerabilities in other sectors such as telecoms and social media are facilitating fraud, as part of a holistic strategy to protect consumers from harm.”