Act now to protect customers, banks told
Govt says the nearly $200m lost to scams last year ‘needs to change’
The Government has fired a shot across the bow of the banking sector, calling for the immediate introduction of new measures to protect customers — and reimburse scam victims who lose life-changing sums of cash.
The Government yesterday set deadlines for action: If banks fail to act by September, they now risk having changes forced upon them through regulation.
Commerce and Consumer Affairs Minister Andrew Bayly has written to the NZ Banking Association saying retail banks need to strengthen their processes to give Kiwis better safeguards from organised criminals.
“Nearly $200 million was lost to scams last year. This needs to change,” he told the Weekend Herald.
Bayly has instructed the banks to investigate a voluntary reimbursement scheme to improve consumer compensation, like that in force in Britain, where banks are now required to refund customers who are tricked into authorising fraudulent payments to scammers up to a limit of £450,000 ($933,000).
At present, New Zealand banks do not have to reimburse customers who authorise the payments unless banks have missed obvious “red flags”.
Bayly has also called on banks to progress work to implement “confirmation of payee” technology — letting customers check the name of any account they send money to — and wants the Code of Banking Practice updated to protect customers.
“Scams are becoming more sophisticated and causing a growing number of vulnerable Kiwis significant emotional harm and financial loss,” Bayly said. “I have written to the banking sector, setting out my expectations. I will monitor progress in the coming months.”
Pushed on whether he would regulate the banks if they failed to act voluntarily, he said: “We’re certainly asking them to move at pace.”
Bayly said he’d given the banking sector until September to update him on a voluntary reimbursement scheme and until the end of the year to introduce confirmation of payee.
“We’re making a decision at that point. I’m not going to prejudge that. I hope they do come back with something that gives people confidence.”
His letter, obtained by the is more blunt, warning banks to take “immediate and concerted action”.
“I will be closely monitoring your progress and have asked my officials to keep me updated. I expect you to prioritise this work.”
Yesterday’s move follows months of pressure on retail banks amid a surge in investment scam cases where criminal syndicates abroad have exploited our payment system to fleece hundreds of millions of dollars from unsuspecting Kiwis.
On Thursday, Banking Ombudsman Nicola Sladden warned that banks needed to urgently improve fraud detection systems and customer protections.
She also called for the urgent introduction of a co-ordinated anti-scam centre and for the Financial Markets Authority to review the Code of Banking Practice, saying further delays would erode trust in the sector.
Consumer NZ said banks had failed to protect customers despite repeated warnings and it was time the Government forced their hand by wielding a “big stick”.
Banking Association chief executive Roger Beaumont said banks were committed to helping protect customers from scammers.
Confirmation of payee would start
I have written to the banking sector, setting out my expectations. I will monitor progress in the coming months. Andrew Bayly, Commerce and Consumer Affairs Minister
to roll out by the end of the year and an anti-scam centre was up and running, targeting money mules, he said.
“Scams aren’t just a bank problem — people are deceived by fake websites, emails, texts, and social media ads. Government and other industries, particularly social media companies, also need to step up.
“We support the Banking Ombudsman’s call for digital platforms to remove fake websites more quickly. They’re often at the start of a chain of events that leads to a scam.
“To better protect New Zealand from scams we need a co-ordinated, multi-sector approach where everyone plays their part.”
Beaumont said banks would investigate a voluntary reimbursement scheme for customers who lose money in authorised payment scams.
Consumer NZ chief executive Jon Duffy said the watchdog’s latest research showed one in 10 households had lost money to a scam in the past year. “In reality, the total figure lost to cyber criminals last year is likely to be significantly more than $200m.
“Given the scale of impact on . . . households, we are concerned that asking banks to voluntarily reimburse scam victims won’t go anywhere near far enough to address the great, everpresent and evolving threat that cyber criminals pose to us all.”
While Duffy welcomed yesterday’s moves from the Government, he said NZ was already so far behind other countries when it came to scam protections. “The banks need to catch up, and fast, and it’s on the Government to make that happen.”