Banks’ internet fraud betrayal
They scrap plan to join forces and create central fund for victims
FRAUD victims have been let down by bickering banking giants – after plans to introduce a central compensation fund were scrapped.
It had been previously proposed that by January, major banks would pay into a shared fund, used to refund customers tricked into handing cash to fraudsters.
But banks have rejected the idea amid fears that those with stricter security checks would end up picking up the tab for firms who have not invested as heavily in fraud prevention.
It has now been suggested that each bank should reimburse its own customers – though this has not yet been confirmed. Experts called the result ‘incredibly disappointing’.
Britain is facing a fraud epidemic, with bank scam victims losing more than £1.1million per day.
A total of 57,549 cases of ‘authorised push payment scams’ were recorded by banks in the first six months of 2019, according to banking trade body UK Finance.
This is where victims are tricked into transferring money, often by criminals posing as their bank, the police, a builder or even the taxman. Others are convinced into spending money on goods or investments that don’t exist.
Only £39.3million of the lost £207.5million was refunded, with banks blaming victims for approving the payments. In a major victory for Money Mail’s Stop the Bank Scammers campaign, new rules were introduced in May to ensure victims were refunded, provided they have taken steps to protect themselves. However, banks had only pledged enough cash to compensate victims until January.
At this point a new scheme was supposed to have been introduced to ensure no one was left out of pocket. However, payment provider Pay.UK said there were ‘a number of unresolvable issues’ – such as whether a shared fund would be effective in driving investment in fraud prevention, the impact on competition and whether it could be enforced. Start-up Monzo also feared the scheme would be too costly for smaller banks. Instead, banks want a ‘self-funding’ model where they are each responsible for refunding their victims.
TSB has already launched a ‘fraud refund guarantee’, and has been compensating victims since April.
Jenny Ross, Which? money editor, said: ‘It is incredibly disappointing that the banking industry cannot reach agreement on how to reimburse innocent customers, and no one else seems willing to step up to protect victims.’
And Paul Horlock, chief executive of Pay.UK, said: ‘We believe innocent victims need to be reimbursed in a ‘no-blame’ scenario, as does most of the industry.
‘In the meantime, the power to compensate individual customers remains in the hands of the payment providers.’
Earlier this month the Treasury Committee accused banks of failing to do enough and urged banks to refund victims of historic fraud, which could see the industry facing a £1billion compensation bill.
Stephen Jones, chief executive of UK Finance, said: ‘We urge any future government to put new laws in place quickly that ensure victims are protected and reimbursed.’