October 7, 2019 11:01:00 PM
Blameless scam victims could once again be at risk of losing their life savings if long-term funding for a reimbursement pot is not agreed, Which? is warning.
A voluntary code was launched by banks in May to make it easier for people who are tricked into transferring money directly to a fraudster to get their money back.
People were previously losing large amounts of money because they had authorised the payment and so their bank was not obliged to refund them.
An interim way of funding the reimbursement pot was agreed up until the end of 2019 – but Which? said time is running out to agree a long term solution.
Which? and trade association UK Finance have written to payments body Pay.UK, urging it to approve a plan to ensure bank transfer fraud victims continue to get their money back in the “no blame scenario” – when both they and their payment service provider has done everything expected of them under the voluntary code.
Which? said the final decision sits with Pay.UK, “which now has the important task of either ensuring the favoured industry and consumer group proposal is agreed, or making a decision that risks blameless scam victims being left unprotected from January 1”.
UK Finance jointly wrote on behalf of HSBC, Santander, Barclays, Lloyds, Metro, Nationwide and RBS.
Which? said the proposal – for banks to pay a small fee on some transfers to collectively fund a “no blame” reimbursement pot – was agreed and submitted following months of talks involving banks and consumer representatives.
A 2.9p levy would be applied to some types of faster payment.
Losses to this type of scam – also known as authorised push payment (APP) scams rose to £147 million in the first six months of this year.
In their letter, Which? chief executive Anabel Hoult and Stephen Jones, chief executive of UK Finance, warn: “Authorised push payment (APP) fraud is a crime which can have a devastating impact on its victims, which is why protecting consumers is a priority for us all.
“The proposal set out… will provide a long-term, sustainable funding system for the reimbursement of victims of APP scams under the voluntary code in situations where both the customer and payment service provider have done everything expected of them, known as a ‘no blame’ situation.
“If the Pay.UK board fails to pass the change request, many victims of APP scams could once again risk losing their life savings to this devastating crime.”
Which? said it believes it is important for the scheme to be collectively funded by the industry to give all firms an incentive to individually and collectively work to prevent scams from happening in the first place.
A consultation closed on October 1 and Pay.UK’s decision is expected to be made public in November – just a month before the current interim funding deal expires.
Anabel Hoult, chief executive, Which?, said: “Great strides have been made towards offering consumers greater protection against bank transfer scams – and we believe this proposal is the best way of ensuring blameless fraud victims will continue to be reimbursed.
“Time is running out to agree a solution, so we urge Pay.UK to accept this important proposal – as it is unthinkable that we could see a return to the dark days of blameless victims losing their life savings to this devastating crime.”
Mr Jones said: “Protecting customers from fraud is a priority for the finance industry.
“The proposal by seven payment service providers of a per-transaction fee on certain faster payments would offer a long-term, sustainable funding system for reimbursing victims of APP scams where both the customer and payment service provider have done everything expected of them.
“Yet even when a customer is reimbursed, the money stolen still ends up in the pockets of organised criminal gangs involved in drugs, arms and human trafficking.
“That is why the finance industry remains focused on stopping fraud occurring in the first place and helping law enforcement to apprehend and disrupt those responsible.
“Criminals continue to exploit vulnerabilities outside of the finance industry, such as third-party data breaches, so it is important that all sectors take responsibility for tackling fraud and support victims.”
Pay.UK said in a statement that it recognises the “devastating effect” of APP fraud, adding: “Our call for information is the first time that there has been an open, public consultation regarding the ‘no blame’ funding mechanism, so it is essential that we give proper and due consideration to all of the responses and evidence provided.
“We have received 39 responses to our call for information, which closed on October 1, from a wide selection of organisations both within and outside the payments industry, and we are now analysing the evidence provided in these submissions in detail.
“Pay.UK is an independent not-for profit body, with an independent board, and regulated by both the Bank of England and the Payment Systems Regulator.
“As such, it is vital that we take into consideration the range of views we have received, regarding the way any funding mechanism works, as part of our overall assessment of the proposal.
“Once we have completed our full analysis, including our policy, operational and legal assessment, our Board will then be in a position to make a properly informed evidence-based decision on the proposal.”
Pay.UK said: “The power to compensate individual customers is, and always has been, in the hands of the payment service providers should they wish to do so.”