In a world first, the UK Parliament this week passed legislation that will protect banking customers from the losses they experience as a direct result of being tricked by scammers.
British banks and other payment providers will now be legally liable to reimburse the vast majority of their customers for scam losses that occur via transfers on their platforms. In comparison, more than 95% of Australian scam victims are forced to carry the loss themselves.
The move comes after four years of voluntary reimbursement by the UK’s 10 biggest banks under the Contingent Reimbursement Model Code (CRM Code). Under this Code, the banks reimbursed 66% of their customers who lost money via their banking platform to scams in 2022. Another bank, TSB, also applied their own reimbursement model through their “fraud refund guarantee” customer policy and have reported that 98% of customer scam losses have been reimbursed.
“Mandatory reimbursement from the banks is the best solution to stopping scams, by incentivising the banks to invest in technology that can prevent and stop scam transactions,” said Consumer Action Acting CEO Tania Clarke.
“The UK has seen reimbursement by the major banks play out on a voluntary basis and enshrining it in law is a prudent decision. It is backed by data that demonstrates the UK is not a soft target for scammers anymore,” she said.
In 2022, British banks that committed to the CRM Code reported a 19% reduction in scam losses on the previous year. By comparison, in 2022 Australia saw a 62% increase in scam losses via bank transfer.
“The new UK model will ensure that banks are incentivised to crack down on scam transactions at both ends, as the banks receiving scam transactions will be obliged to cover 50% of the losses.
“Our lawyers have spoken with many people who are very frustrated they have no effective legal rights against banks that receive scammed funds from their accounts. The Federal Government should follow the UK lead – better regulation needs to be put in place in Australia to make sure banks wear the risk for failing to protect customers online. Scam victims shouldn’t be bearing the risk on their own,” said Ms Clarke.
“Banks have the financial resources plus huge amounts of data, and ability to access the technology to analyse this data for red flags and stop scam transactions in the first place. The UK’s approach recognises that banks and other payment providers are best placed to identify signs that a payment is part of a scam.”
Consumer Action calls on the Commonwealth Government to heed the lessons of the UK and financially incentivise banks to make our banking systems safer and more secure, by requiring them to reimburse their customers who fall victim to scams.
Media contact: Mark Pearce, Media and Communications Adviser, 0413 299 567, firstname.lastname@example.org