£700k lost to bank transfer scams every day, Which? reveals
More than £700,000 is being lost to bank transfer scams every day, new Which? research has revealed as the consumer champion calls for stronger protections to fix an unfair and inconsistent industry approach to reimbursement that currently results in less than half of losses being returned to victims.
UK Finance figures show that a total of £412.9 million has been lost across 189,000 cases of bank transfer fraud between the introduction of a voluntary industry code on reimbursement in May 2019 and the end of 2020.
This equates to an eye-watering £707,000 a day, £29,000 an hour or £491 a minute.
However, only 46% of losses have been reimbursed under the code. As a result, £225 million has not been returned to victims, meaning they have been left to shoulder net losses at a rate of £384,000 a day, £16,000 an hour or £267 a minute.
It is now two years since the reimbursement code, which banks helped to design, came into force, but the large numbers of scams still taking place and the huge sums of money being lost highlight how systemic issues with protections for this type of crime remain.
The code makes it clear that if the customer is not at fault then they should be reimbursed, but Which?, as well as the Financial Ombudsman Service (FOS) and other consumer advocates, have repeatedly found banks are incorrectly deciding not to return their losses.
This includes cases where victims are subjected to the highly sophisticated tactics used by fraudsters, or where banks have not done an effective job of warning customers about the threat of being scammed.
Which? believes these factors show that the existing approach to tackling bank transfer scams is not sufficient. The organisation is now calling for changes so that mandatory standards of consumer protection are introduced to provide fairer and more consistent outcomes for people who have lost potentially life-changing sums of money.
Which? believes that the regulator must be able to effectively enforce these standards in order to put an end to firms unfairly pointing the finger of blame at customers to avoid reimbursing their money.
Official figures from the Lending Standards Board have shown that banks signed up to the code hold victims fully or partially responsible for being scammed up to 77% of the time.
Decisions published by the Financial Ombudsman Service also show that in some cases banks are setting unrealistic expectations on customers to spot and prevent fraud, or that warnings to customers about the threat of being scammed are not up to scratch.
This includes a Bank of Scotland customer who was left £27,000 out of pocket after falling victim to a sophisticated investment scam that involved making payments to a cloned company via telephone banking.
The firm denied reimbursement, but the Ombudsman upheld the customer’s complaint after finding the bank missed “three clear opportunities” to discuss the transfers before they were completed, and believed that the customer wouldn’t have made the payments at all if provided with warnings.
An HSBC customer was also denied full reimbursement after being scammed out of £548 when booking flights for his family through a fraudulent travel website.
The bank argued that the customer should only receive partial reimbursement, as while it acknowledged that it hadn’t done enough to warn him about this type of scam, the customer should have done more checks to make sure the payee was genuine, such as checking the legitimacy of the company by “looking it up on Companies House”.
The FOS described this as “a step many reasonable customers would not take”, and decided that the firm should reimburse the customer in full. The mounting evidence suggests that some of the same banks that helped create the code are now choosing to interpret it so as to avoid reimbursing victims.
The Payments Systems Regulator (PSR), which has itself said that reimbursement rates are low, is currently considering potential measures that could reduce losses to this type of crime.
Which? strongly backs proposals from the PSR to change the rules of the Faster Payment Scheme, to set mandatory standards for the reimbursement of those conned out of their money, and believes the Treasury must commit to giving the regulator whatever powers it needs to make that happen.
Gareth Shaw, head of money at Which?, said: “Despite huge sums being lost on a daily basis, low reimbursement rates based on inconsistent and unfair decisions by firms demonstrate how the voluntary code isn’t providing the safeguards promised to victims of bank transfer scams.
“Two years on from the code’s introduction, it is clear that the Payment Systems Regulator must now take decisive action to prevent the continued devastation caused by this type of fraud.
“It needs to introduce mandatory standards of consumer protection for all banks and payment providers, and require greater transparency from firms on how they are dealing with this crime.”