Bank account victims tricked into transferring money to fraudsters in 'authorised push payment' (APP) scams will find it easier to get their money back under a new code of conduct that comes into force today.
Under the code, banks will have to reimburse consumers for their losses provided they have taken reasonable care.
The burden of proof will fall on the banks rather than customers, which will have to prove that a customer acted carelessly when they were scammed. For example, by ignoring warnings when setting up a new payee.
Lenders that have signed up to the code include Barclays, HSBC, Lloyds Banking Group, Metro Bank, Nationwide, Royal Bank of Scotland, NatWest and Santander.
Chris Hemsley, co-managing director of the Payment Systems Regulator, says: “The code is a major step-up in protections and it reflects our strong belief that if somebody has done everything they can reasonably do to protect themselves, they should be reimbursed. I welcome the commitment that these banks have made to their customers.”
Figures from UK Finance show that over £1.2 billion was stolen by criminals committing bank fraud last year. Banks will usually refund customers if money has been stolen from their account without them knowing.
However, victims of authorised push payment fraud – when the customer is tricked into authorising a payment to another account – do not receive the same level of protection.
Banks frequently refuse to refund victims of this type of scam on the grounds that they authorised the transaction themselves.
During the first half of 2018 consumers lost £145.4 million because of authorised push payment scams, while just £31 million was returned.
Push payment fraud criminals will often pose as someone who has been employed by the victim, such as a builder of solicitor.
The criminals then send the victim a fake invoice to get them to send money to a bank account controlled by the fraudster.
Laura Suter, personal finance analyst at investment platform AJ Bell, says the new code will tip the scales back in the favour of bank fraud victims.
She says: “The banks in the scheme can no longer dismiss claims to be reimbursed offhand, and already we’ve seen some of these banks ramp up their warnings to customers making transfers.
“But ultimately the banks still have more to do to stop these scams happening in the first place, particularly as the most vulnerable in society are more likely to be victims.
However, as the code is not retrospective it will do little to help those who have already been a victim of push payment fraud.
Ms Suter adds: “This new code will be cold comfort for those who have already been scammed out of their life savings, as the code won’t be retrospective.
"The industry also needs to come up with a way to fund the reimbursements long-term, as the current funding system is only in place until the end of this year.”
Another downside is that not all banks have signed up to the code, including the Co-operative Bank and Virgin Money.
Last month, TSB said it will refund customers who are victims of any type of fraud as part of its new fraud guarantee.
The bank says customers will be refunded for any loss they’ve suffered from their account as a result of third-party fraud.
This article was originally published in our sister magazine Moneywise, which ceased publication in August 2020.
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