Saturday , April 17 2021

Victims of bank transfer scams risk being left unprotected – The Guardian, Theguardian.com


Industry fails to agree on compensation plan after current scheme expires

Bank cards in a purse

More than £ 1m a day is being lost to scams in which people are tricked into authorizing a payment to an account controlled by a criminal. Photograph: Alamy

Bank transfer scam victims risk being left unprotected from January after the industry failed to agree a plan to compensate people.

More than £ 1m a day is being lost to scams in which people are duped into authorizing a payment to an account controlled by a criminal. The failure to agree a protection plan may make it more likely that the next government will step in.

In response to this growing crime, a voluntary code requiring banks to reimburse affected customers who meet the criteriatook effect on (May).

But the funding arrangement that bails out some of the victims of this scam is due to end on 31 December. This relates to where the customer and their bank have done everything expected of them under the code – known as the “no blame scenario”.

Last month the consumer body Which? warned that time was running out and, unless a solution was agreed soon, there was a risk of “a return to the dark days of blameless victims losing their life savings to this devastating crime”.

A proposal for banks to pay a small fee on some transfers to collectively fund a no-blame reimbursement pot was put forward by seven banks and building societies. A2.9p levy would be applied to some faster types of payment.

But the payment body Pay.UK, which was tasked with making the final decision, has rejected this proposal after a consultation. It concluded that there was no industry consensus to finance a central fund to reimburse victims.

The body said the lack of agreement among banks, building societies and other financial firms meant the proposal could not be implemented or enforced in practice, with the consultation feedback indicating “a number of unresolvable issues”.

So from January it will be up to individual banks to decide whether they are going to reimburse victims.

Fraudsters stole £ 616 m from UK bank customers during the first six months of 2019,according to the banking group UK Finance. Of this total, £ 207 m was lost to bank transfer scams – up 40% on the same period in 2018.

This type of scam is officially known asauthorized payment paymentfraud and includescases where email accounts– either those of individuals or the companies or tradespeople they have employed – are hacked to trick consumers into sending large sums to criminal accounts.

This month, a report from the Commons Treasury committee said the voluntary code should be made compulsory via legislation. However, they noted that this would not help previous victims of such frauds, and so banks should consider retrospectively reimbursing customers back to 2016 .

Responding to Pay.UK’s announcement, Which? said: “It’s clear that a voluntary, industry-led approach to protecting scam victims is not enough. The next government must work with the regulator to make the code and reimbursement mandatory. ”

The banking body UK Finance said it was disappointed that a way forward had not yet been agreed. However, Paul Horlock, Pay.UK’s chief executive, said: “With or without a central pot, payment providers have always had, and will continue to have, the power to compensate individual consumers.”

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