Banks will be forced to offer compensation to victims of scam

UK banks will be forced to offer refunds to blameless victims of ‘push payment’ scams as part of the government’s plans for new legislation to tackle the growing threat of financial fraud.

Scams have increased since the pandemic, with a sharp rise in authorized push payment (APP) frauds, where people are tricked into sending their money to accounts controlled by criminals.

More than £ 355million was lost to APP fraud in the first half of 2021, a 71% increase over the same period in 2020. The number of cases in the six months was nearly double that of 58,000 registered in the first half of 2019.

Ministers on Thursday pledged to strengthen the powers of the payment systems regulator (PSR), which sets rules for banks and other payment service providers, but said it has limited room for maneuver to force banks to take repayment action.

John Glen, Economic Secretary to the Treasury, said the government would “legislate to remove any obstacles to regulatory action as soon as possible.”

“The government’s position is that corporate liability and reimbursement requirements must be clear so that customers are adequately protected. “

Most of the big banks are already signatories of a voluntary code, put in place in May 2019 to fight against fraud. This has improved reimbursement rates for victims of push payment scams, when they have not acted with “gross negligence” or knowingly turned their money over to a criminal. TSB has been offering its clients a money back guarantee in the event of fraud since April 2019.

However, the code has been applied inconsistently by different banks and the average repayment rate remains below 50 percent since its introduction. PSR said banks could do more to help those who have been swindled out of their savings. “It is unlikely that victims did not act appropriately in 50% of cases. ”

Anabel Hoult, chief executive of consumer group Which ?, said the Treasury announcement was “a huge victory for consumers.”

“People are still losing life-changing amounts of money every day, so the Treasury must act quickly to introduce the necessary legislation.”

The mandatory reimbursement rules were part of a package set out by the ESP in its consultation paper released on Thursday. He wants the 12 largest banking groups to publish performance data on APP scams, including victim reimbursement levels. He also expects payment providers to improve their “information sharing” on risky payments.

“We expect to see progress in this area and we are ready to act if necessary,” said PSR. Its consultation runs until January 22, 2022.

UK Finance, the banking industry body, said it had called for legislation on a regulated code for consumer protection and welcomed the Treasury announcement. But he also singled out organizations outside the payments system – such as social media companies and research sites – for fueling the scams.

Katy Worobec, Managing Director of Economic Crime at UK Finance, said: “As PSR recognizes, other industries have a key role to play in the fight against fraud, which is why it is so important that there is coordinated action by government and other sectors. to combat what is now a threat to national security. This is also why we believe that all fraud data should highlight the external drivers of fraud, such as data breaches, social media and other online platforms.

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