Regulator rejects call to make banks refund transfer scam victims

In contrast with fraud on many other payment methods, such as credit cards, if you're conned into sending a bank transfer to a fraudster you aren't guaranteed a refund from your bank. The increasingly sophisticated nature of these scams has led to concerns more people are being tricked, with some left £1,000s out of pocket.

In September Which? filed a 'super-complaint' about the issue calling on banks to shoulder more responsibility for money lost to scams made by bank transfer. The group believes placing liability on banks would give them an incentive to develop better ways of nipping bank transfer fraud in the bud.

But responding to the complaint today, the payments regulator rejected its call for banks to reimburse victims, saying there was "not sufficient evidence to justify a change in liability" and that making banks liable could have "possible unintended consequence".

The PSR said it hadn't ruled out "changes to the obligations or incentives of banks" in future – but its decision not to support a change in liability for this type of fraud has been criticised by Which? for letting "banks off the hook".

However, the regulator has identified three main problems with how this type of fraud is handled:

• Banks need to improve the way they work together in responding to reports of bank transfer scams.

• Evidence suggests some banks could do more to identify potentially fraudulent incoming payments and to prevent accounts falling under the influence of scammers.

• Data on the scale and types of these scams is of poor quality.

In response to these problems, the PSR has secured the agreement of Financial Fraud Action UK – a payments industry body – to do the following:

• Develop a "common understanding" of what information about fraud can be shared between banks under the current law, and the main legal barriers to sharing further relevant information.

• Develop a "common approach" or "best practice standards" that banks should follow when these types of scams are reported.

• Develop, collect and publish industry-wide bank-transfer scam statistics, to address the lack of clear data on the scale and scope of the problem, and to allow monitoring of the issue.

For what to watch out for to avoid being tricked, see our 30+ Ways to Stop Scams guide.

What does Which? say?

Which? home & legal services managing director Alex Neill says: "The regulator has finally acknowledged the considerable consumer harm caused by bank transfer scams. However, while recognising that the industry is not doing enough, it has failed to adequately address the issue of liability and has let the banks off the hook, giving them little incentive to do more to protect their customers.

"The outcome for people is unfortunately that they will continue to be scammed out of millions of pounds. We need to see swift action and not see this kicked into the long grass in the second half of 2017."

How bad is bank transfer fraud?

Which? highlighted a number of case studies in its super-complaint in which victims lost out to this type of fraud.

In one, fraudsters claiming to be from a UK bank convinced a customer that their account had been compromised and persuaded them to transfer £17,500 savings to another account, set up in their name.

Within minutes, the customer realised they had been tricked and contacted their bank, to be told the money had gone. The victim ended up being offered a refund of just 10p from their bank – the amount the fraudsters had left behind.

In another case, a holiday lettings customer booked an apartment in Paris and received an email with lettings agency branding asking for payment to be sent via a bank transfer. The customer transferred the money from his account, but soon after the property was taken down from the listings – and ultimately the customer was unable to get any of his money back.

What protection is in place if I'm defrauded using another payment method?

Consumers have much better protection from scammers seeking funds by payment routes other than bank transfer.

• If you inadvertently pay a fraudster with a credit card, you're likely to be able to recover the lost funds from your bank under Section 75 of the Consumer Credit Act (see our Section 75 guide for more help).

• If you're tricked into providing your banking security details and a scammer uses them to make an unauthorised transfer of funds, you're likely to be able to get your money back from your bank under the Payment Services Regulations 2009.

However, it's important to note that these rights won't apply in every case so be sure to check your individual circumstances.

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