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By Stephanie Tonkin, CEO, Consumer Action Law Centre  

The big four banks are tipped to make record profits this financial year, with some analysts suggesting they will collectively rake in more than $33 billion, up from $28.5 billion last year. Commonwealth alone reported its biggest-ever half-year profit this month, at $5.15 billion, an increase of 9 percent.   

This windfall, largely driven by rising interest rates which have been passed on in full to borrowers but at lower rates to deposit holders, puts banks in an enviable position – in stark contrast to many low- to middle-income families who are being battered by cost-of-living pressures and housing stress.   

Yet, despite their increasing profit margins, the major banks continue to  underplay a crisis that is affecting thousands of their customers and causing untold financial and emotional distress in the community. Australia’s scam epidemic is ruining lives across the country, with the Australian Competition and Consumer Commission estimating losses last year at $4 billion, or $11 million a day. In most cases, people who have been scammed have little chance of ever seeing their money again.    

Our financial counsellors are on the frontline of the scams crisis and the stories they hear are sobering, to say the least. We speak to people every week, victims of fraud, whose accounts have been bled dry by scammers, driving them and their families into poverty. We speak to retirees who, through no fault of their own, have lost their life savings to these criminals. For those who are already struggling with mental health or other life issues, being scammed can greatly exacerbate their situation.    

Banks argue that it is the individual’s responsibility to recognise and prevent scams, even though scams are becoming increasingly complex, elaborate, and sophisticated – often impersonating or replicating the banks’ own platforms. Customers who lose money this way are rarely reimbursed by their bank and if they are, the amount is often a small proportion of that lost.   

So what needs to happen to fix this diabolical state of affairs?    

The banks need to urgently invest in the technology and systems that will make Australia a harder target for scammers. With few scam prevention and detection strategies currently in place for online money transfers, the banks’ systems favour speed over safety. This needs to change.    

The banks can and need to act faster to make their payment platforms safer for all customers. In a welcome move, Westpac and the Commonwealth Bank recently announced plans to introduce technologies allowing customers to check that the account name they entered matches the name used for past transactions to the recipient account before authorising a payment, which should reduce fraudulent invoice scams in particular. It’s vital that the banking industry introduces this safety feature across the board to protect all customers. Additional investment is also needed across the banking sector to further enhance scam prevention and detection systems, mobilising the resources and technological know-how that the banking industry clearly has.   

Banks must change their attitudes and approach to customers who fall prey to scams. Rather than lay blame on customers who are scammed, banks need to commit to reimbursing them. Mandatory reimbursement of scam losses, except in cases where customers have been grossly negligent, would incentivise banks to tackle this crisis head-on. If our banks won’t sign up to mandatory reimbursement policies themselves, the Federal Government needs to make it happen.    

In the UK, TSB, a moderate-sized bank, has adopted a fraud refund guarantee that sees them reimburse 98% of scam losses. TSB reports that this has left them better placed to stop scams and the policy is benefitting both its customers and the bank’s bottom line.  

While consumers should always be on guard when they receive unsolicited calls, texts and emails, the fact remains that scammers will inevitably refine and adapt their approach as we become more cognisant of their tactics. We can educate and inform people about scams as much as we like but unless banks take real action scammers will always be one step ahead of us.  

With the significant data and technology available to them, banks have the resources to make it more difficult for criminals to operate in our online banking spaces. For scammers to succeed, they require access to an Australian bank account. Improving the security of bank platforms therefore provides the best opportunity to break the scam crime model.  As consumers, we shouldn’t settle for anything less. 

Individual scam victims don’t have the resources or funds to tackle this raging issue, but our banks most certainly do. It’s time they stepped up to the plate. 

ENDS 

Media contact: Mark Pearce, Media and Communications Adviser,            0413 299 567, media@consumeraction.org.au