Only 46% of bank transfer scam victims get money back, says Which?

Only 46% of bank transfer scam victims get money back, says Which? (Photo by Sion Touhig/Getty Images)

Less than half of the losses of fraud victims who transfer cash to scammers’ bank accounts have been repaid under a voluntary code that banks are applying inconsistently, according to a consumer group.

Which? called for the code, introduced in 2019 to ensure the reimbursement of money lost in bank transfer scams, to be strengthened and mandatory standards to make the process “fairer and more consistent”.

£707,000 lost everyday under voluntary code

The group cited UK Finance figures which show £412.9 million has been lost in 189,000 cases of bank transfer fraud between the introduction of the code in May 2019 and the end of 2020 – amounting to £707,000 every day.

But Which? said only 46% of the money lost in that time had been returned, meaning victims had taken a £225 million hit.

Bank transfer fraud, also known as Authorised Push Payment (APP) scams, involves a scammer posing as a genuine payee.

The code was introduced in 2019, and banks involved are intended to offer more protection to customers from the scams.

Banks that are part of the scheme include Barclays; HSBC, including First Direct and M&S Bank; Lloyds Banking Group, including Halifax, Bank of Scotland and Intelligent Finance; Metro Bank; NatWest, including RBS and Ulster Bank; Nationwide; Santander; Starling and The Co-operative Bank.

The code states that if a customer is not at fault they should be reimbursed but Which?, the Financial Ombudsman Service (FOS) and other consumer advocates, have found banks are incorrectly deciding not to return losses.

This includes cases where victims are subjected to advanced tactics used by fraudsters, or where banks have failed to warn customers about the threat of being scammed.

Gareth Shaw, head of money at Which?, said: “Two years on from the code’s introduction, it is clear that the Payment Systems Regulator must now take decisive action to prevent the continued devastation caused by this type of fraud.

“It needs to introduce mandatory standards of consumer protection for all banks and payment providers, and require greater transparency from firms on how they are dealing with this crime.”

“The regulator is currently consulting on the future of fraud protections – and we support the proposals for guaranteed refunds. We also called for full transparency on industry refund rates so that customers know how their bank performs on the vital issue of fraud refunds.”

Banks signed up to the code to blame up to 77% of the time

Data from the Lending Standards Board has shown that banks signed up to the code partially or fully blame victims for being scammed up to 77% of the time.

The FOS also said that banks are setting unrealistic expectations on customers to spot and prevent fraud.

An HSBC customer did not receive full reimbursement after being scammed out of £548 when booking flights for his family through a fraudulent travel website.

The bank acknowledged their role in not informing the customer about this particular scam but blamed the customer for not looking at the legitimacy of the company, for example, via Companies House.

A customer from the Bank of Scotland lost £27,000 after falling victim to an investment scam.

They made payments to a cloned company via telephone banking. The bank denied reimbursement, according to the ombudsman.

The Payments Systems Regulator (PSR) argued that reimbursement rates are low and Which? supports proposals from the PSR to change the rules of the Faster Payment Scheme.

The scheme aims to reduce payment times between different banks’ customer accounts and has a transaction limit of £250,000.

They are also calling on the Treasury to give the regulator more power in this area.

Ashley Hart, head of fraud at TSB, said: “TSB firmly believes that innocent victims of bank fraud deserve to be protected from what could otherwise be life-changing losses.

“We have refunded 99% of all fraud cases since introducing our Fraud Refund Guarantee two years ago.”

Last week, Which? contacted all major banks and building societies asking them to publish their reimbursement rates for bank transfer scams.

The deadline was set for Friday, with responses set to be revealed shortly