Banks will be forced to reimburse ALL victims of online fraud under new laws to be brought forward this month
- New laws are a major victory for the Daily Mail’s Stop the Scammers campaign
- Move should end lottery which leaves half of all victims without help from bank
- Treasury minister John Glen said the current situation is ‘not acceptable’
- Currently customers may have to show they took steps to protect themselves
- Banks say that a record £1.3billion was lost to scammers last year
Banks will be ordered to reimburse all victims of online fraud under laws to be brought forward this month.
In a major victory for the Daily Mail’s Stop the Scammers campaign, financial regulators will be given powers to require banks to compensate people ripped off by online fraudsters.
The move is designed to end the lottery which means around half of all fraud victims are refused help by their bank.
Treasury minister John Glen praised the Mail’s campaign and said the Government was determined to tackle the growing menace. ‘The current situation where customers can’t be absolutely sure they will be reimbursed for fraud is not acceptable,’ he said.
‘The banks have done some work but there has been an inconsistency. We want to make this mandatory so that people can be 100 per cent sure that action will be taken.’
‘The current situation where customers can’t be absolutely sure they will be reimbursed for fraud is not acceptable,’ said Treasury Minister John Glen (pictured far right)
Whitehall sources said the new measures would be included in the Financial Services and Markets Bill later this month.
The law will place a duty on the Payment System Regulator to tackle the issue, and give the watchdog powers to order the banks to comply. Under the current voluntary scheme some banks require customers to show they have taken steps to protect themselves before they will compensate, while others refuse most claims.
Mr Glen said that customers faced ‘very, very sophisticated frauds’. He cited one case in his own Salisbury constituency where a scammer posing as a utility company correctly told the victim that roadworks had been carried out in their street that week before demanding payment.
The regulator will finalise the new compensation scheme later this year, but Mr Glen said the ‘default’ should be that customers are reimbursed in full.
The legislation is targeted at the growth in ‘authorised push payment’ fraud, under which a payment is sent under false pretences. It will take about a year before the new mandatory system takes effect.
Banks say that a record £1.3billion was lost to scammers last year, including almost 200,000 authorised push payment frauds.
Mr Glen said ministers were also acting on another of the Mail campaign’s demands by requiring banks to extend the ‘confirmation of payee’ scheme which verifies account details before funds are sent.
He said that by the end of next year this would cover over 99 per cent of payments.
Financial regulators will be given powers to require banks to compensate people ripped off by online fraudsters. The move is designed to end the lottery which means around half of all fraud victims are refused help by their bank
This newspaper is also calling for the appointment of a dedicated minister for fraud, and demanding that police make tackling fraud a priority and boost the number of specialist investigators.
Yesterday a former HM Inspector of Constabulary warned that the police were ‘nowhere near addressing online fraud and crime’.
Zoe Billingham told BBC Radio 4’s Today programme: ‘There has been an exponential increase in online fraud and crime. Have the cops got the skills to be able to tackle and address that? At the moment, they’re absolutely nowhere near.’ Sources last night told the Mail that Priti Patel has demanded a new fraud strategy by the early autumn to ensure the crime is made a higher priority.
The failing Action Fraud system will be replaced by one spearheaded by the National Crime Agency. It will look at whether reports of fraud are assigned correctly, with major changes understood to be on the cards.
Good news – but we can’t afford any more delays
By Victoria Bischoff, Money Mail Editor
For years blameless fraud victims were routinely denied refunds.
Then in 2019, after a campaign by this newspaper, they were thrown a lifeline.
Major banks agreed to sign up to a voluntary code of conduct that requires firms to repay customers who have been preyed on by sophisticated scammers.
But this was only ever supposed to be a temporary solution while plans for proper regulation were thrashed out.
Yet three years later we are still waiting. Just half of victims tricked into transferring money to scammers were refunded by banks last year.
Meanwhile, the Financial Ombudsman, which deals with disputes between financial firms and customers, has seen complaints about fraud soar.
Tellingly, last year it ruled in favour of the consumer in around three-quarters of these cases. All too often banks are still trying to wriggle out of doing the right thing.
At Money Mail, we hear from scores of readers who have been caught out by the exact same scam but treated completely differently by their banks. One may receive a refund, another a partial repayment, while others are refused altogether.
The problem is that there is major loophole whereby banks can refuse refunds if victims have not taken reasonable steps to protect themselves.
And without clear guidance, firms can interpret this clause however they please. Many, for example, try to pin the blame on victims by claiming they have ignored a warning posted on their website.
This is despite experts warning repeatedly that many of these scam alerts are vague and ineffective. And because there is no requirement for banks to disclose their individual refund rates, they can hide behind industry averages.
Of course, other organisations – not least tech giants which routinely allow fraudsters to advertise online – urgently need to be held to account too.
But banks are on the front line in the fight against fraud. They are in charge of safeguarding our cash yet allow too many suspicious payments to go through unchallenged.
So it is brilliant news the Treasury has finally committed to bringing in laws that will eliminate the current inconsistencies and force banks to compensate all victims.
The only snag is that it will be at least another year before this mandatory scheme takes effect.
Given banks this week revealed a record £1.3billion was lost to scammers last year, victims cannot afford to wait a day longer.