Today is World Consumer Rights Day, which this year focuses on the need for fairer digital finance for all, including better protection from online scammers. New analysis from Consumer Action reveals that Australians—who are now losing more than $2billion annually to scammers—are also failing to get the proper redress they deserve when they make a complaint about the inaction of their banks in preventing scams.
In February 2022, Consumer Action examined 67 public determinations at the Australian Financial Complaints Authority (AFCA) relating to scams. Only 5 were in favour of consumers, 62 were in favour of banks*.
“The sad truth is that the Australian Financial Complaints Authority (AFCA) has very limited powers when it comes to scams, meaning customers are rarely successful in getting a refund,” said Gerard Brody. CEO Consumer Action.
“What is worse is that the Australian Securities and Investments Commission is even proposing to weaken the ePayments Code that will reduce the already limited existing consumer protections relating to scams,” he said.
Mr Brody said that the Federal Government needs to regulate to require banks and payment system providers to refund customers who lose money to fraud through no fault of their own. This would mean people could better trust electronic transactions and the payment systems.
“Australia is falling behind the rest of the world in effective protections against scams. In 2019, the UK introduced a voluntary industry code called the Contingent Reimbursement Model Code for Authorised Push Payment Scams (the CRM Code).
“The CRM Code includes a fundamental principle that when a customer has been the victim of a relevant scam, the bank should reimburse the customer, and there is currently a proposal in the UK to make the CRM Code mandatory for all banks and payment systems providers,” Mr Brody said.
AFCA also needs to update its approach to scam complaints to clarify when it is appropriate for a bank to question a customer’s instruction to make a transaction and consider whether the customer is being scammed. AFCA should be identifying red flags such as:
- the size and uniqueness or otherwise of the transaction,
- the jurisdictions to where the transfer is being made,
- whether transaction limits have been increased to make the transaction,
- customer vulnerability, and
- whether there are indicators the customer is being pressured by a third party.
“A bank exercising reasonable care and skill would inquire about the purpose of higher risk transactions, and not proceed until it is satisfied that the transaction is not fraudulent,” said Mr Brody.
The more than $2 billion a year being siphoned to fraudsters must be considered a real threat to the economy as it recovers from the COVID-19 pandemic.
“Losses of this magnitude should be considered a national security threat and of macro-economic concern. These statistics also hide the impact that scam losses can have on individuals and families—the amounts lost individually are devastating, with people losing their life savings.”
*Remedying scam losses: Consumer Action Scam Losses Briefing220315 Consumer Action Scam Losses Briefing (1)