Funding to compensate bank transfer fraud victims extended to end of 2020
27 February 2020, 15:34
Interim funding arrangements for a voluntary code which compensates bank transfer fraud victims will continue until the end of the year.
Funding arrangements for a safety net which gives blameless bank transfer scam victims greater protection have been extended until the end of the year.
UK Finance, which represents banks and building societies, said the current arrangements for paying compensation to victims of authorised push payment (APP) scams will be extended to December 31 2020.
This will allow more time for regulators, Government and industry to come up with a long-term sustainable funding arrangement.
The voluntary code on APP scams was launched on May 28 2019 to make it easier for fraud victims who are tricked into transferring money directly to criminals to get their money back in “no blame” situations where neither they, nor their bank did anything wrong.
It is the second time that the interim funding arrangements have been extended. They were due to run out at the end of 2019 but were then extended until the end of March.
Concerns have previously been raised about a lack of industry consensus on how the scheme should be funded longer term, leading to worries that people could be left without protection.
Announcing the funding extension, UK Finance said it believes, like others, that issues of liability and reimbursement would best be dealt with by new laws rather than just a voluntary code on its own.
Consumers collectively lost £208 million to APP scams in the first half of 2019, as a result of being tricked into authorising a payment to an account controlled by a criminal or purchasing goods from fake or unofficial sources.
Often, criminals will pretend to be someone from a bank, another type of business or the police to trick their victims into transferring money.
In the past, many people have lost huge sums of cash forever – because they had authorised the transfer and their bank was not obliged to give them a refund.
But Which? recently raised concerns that innocent victims are still being denied compensation.
The consumer group has expressed concerns that banks are putting too much reliance on generic anti-fraud warnings which may not resonate with customers when they are transferring cash.
UK Finance said the payment service providers which provided the funding since the code first launched have agreed to continue doing so until the end of this year.
It means customers of all providers which have signed up to the code will continue to be covered.
In situations where both the victim and their bank have met the required standards set out in the code, the customer will still receive compensation for the money lost, with the bank being able to claim the money from the interim fund.
Stephen Jones, chief executive of UK Finance, said: “The banking and payments industry is committed to defending their customers from fraud and stopping stolen money from going to criminals.
“The APP scams voluntary code has set stronger standards for payment service providers to help protect customers; however there is a responsibility on all industries, not just banking and payment providers, to do more to stop these criminals from being able to target customers.
“There is strong agreement across our sector that the development of any sustainable funding solution to compensate victims of scams must also include those third-party organisations whose data and platforms are used by criminals to facilitate fraud.
“We share the views expressed by the Treasury Committee and Which? that issues of liability and reimbursement should best be addressed by new laws rather than just a voluntary code alone.”
Gareth Shaw, head of money at Which?, said: “While this latest extension will provide some short-term breathing space, it only exposes how far away the industry and regulators are from finding a permanent solution for reimbursing innocent bank customers who fall victim to scams.
“A voluntary industry-led approach is not a long-term solution to the problem.
“The Government must consider directing the regulator to make the code and reimbursement mandatory – to finally ensure millions of people are no longer at risk of losing life-changing sums of money.”
Here are the brands which have signed up to the APP voluntary code:
– Co-op Bank
– First Direct
– M&S Bank
– Lloyds Bank
– Bank of Scotland
– Intelligent Finance
– Metro Bank
– Royal Bank of Scotland
– NatWest Bank
– Ulster Bank
– Nationwide Building Society
– Cater Allen Limited
– Starling Bank