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9 Mar 2022

Bank transfer fraud victims lose £28,000 an hour

The government must act swiftly to protect victims from devastating scams
Man stressed at laptop

Every hour, bank transfer scam victims lose more money than the average UK worker earns in a year, new Which? research reveals. That's why we're calling on the government to urgently act on its commitment to legislate for mandatory reimbursement of victims.

Authorised push payment fraud (APP) - where a scammer tricks you into transferring money to an account they control - is now more common than card fraud, but protection against these scams still lags behind.

The voluntary Contingent Reimbursement Model (CRM) Code was an important milestone for victims when it was introduced in May 2019, but Which? has found that banks apply the standards of this Code inconsistently or unfairly blame victims.

Bank transfer scams reached record levels

In the first half of 2021, losses to APP fraud hit £355.3m, overtaking card fraud for the first time.

Which?'s analysis of UK Finance figures show that between July 2019 and the end of June 2021 a total of £854m was stolen in 306,573 cases of APP fraud, and only 42% of losses were reimbursed.

That means the net loss to victims is a shocking £495m - a rate of £4.7m a week or £28,203 an hour, more than the average UK salary (£25,971).

Innocent victims left out of pocket

Banks are required to refund you for losses for unauthorised transactions such as card fraud - unless you are particularly careless or 'grossly negligent' - but there is limited protection against authorised fraud.

The CRM Code was designed to readdress this imbalance, but it's clear the voluntary approach isn't working.

Repeated Which? investigations have found that banks signed up to the Code are too quick to blame victims who ignore warnings or expect too much from victims even though scammers are paying for fake adverts online, calling from spoofed phone numbers, or even hijacking their devices to name just a handful of common tactics.

Fighting your corner

Banks are routinely rejecting refund claims unfairly. Our exclusive investigation in November 2021 revealed that the Financial Ombudsman Service (FOS) ruled against banks in up to eight in 10 cases about APP fraud.

Victims often have to fight their corner to be treated fairly, including John Andrews, in his 80s, who recently lost £3,600 when a scammer posed as his son over WhatsApp.

Lloyds Banking Group reported at the beginning of the year that the number of WhatsApp scams had surged by more than 2,000% by the end of 2021.

This particular scam followed the same pattern as other 'mum and dad' WhatsApp scams reported to Which?: he received a message supposedly from his son asking him to pay a bill as a favour because he was having problems setting up his online banking. John transferred the money from his Santander account and only discovered it was a scammer when he spoke to his son later that day.

Santander initially said it wouldn't refund John, but after Which? advised him to make a formal complaint citing the bank's responsibilities under the CRM Code, he was fully refunded.

Victims who are told they won't be reimbursed by their banks can take their cases to the FOS but face many stressful months or even years before they get a final decision.

Time for change

The CRM Code has provided an increased level of protection for some consumers, but the Payments Systems Regulator (PSR) has admitted that reimbursement levels have been significantly lower than expected.

The Lending Standards Board and FOS have also repeatedly found issues with inconsistent and unfair treatment of victims.

Which? called for the government to intervene, and in November 2021 it was announced that the Treasury will make the necessary legislative changes to provide for mandatory reimbursement for scam victims.

While the government's commitment is positive, these changes must be introduced swiftly. Which? thinks a reimbursement obligation should be placed on payment providers, with a clear liability framework set out in legislation.

Rocio Concha, Which? director of policy and advocacy, said: 'Despite huge sums being lost to bank transfer scams on an hourly basis, low reimbursement rates based on inconsistent and unfair decisions by banks demonstrate how the voluntary code isn't providing the safeguards promised to victims.

'While commitments to make reimbursement mandatory were a huge win for consumers, it's vital that the government introduces the right legislation that will ensure victims get fair and consistent treatment. The regulator must also ensure it's ready to introduce and enforce mandatory reimbursement rules the moment that this vital legislation is passed.