Legal protection for victims of this banking scam

The government is introducing a new law designed to protect blameless victims of bank fraud better.

Banking customers tricked into transferring money to an account controlled by a scammer, a practice known as authorised push payment (APP) scamming, will be legally entitled to compensation.

APP scams are a big deal. In the first half of the year, this type of bank scam rose by 71%, with £355 million lost by victims.

While banks are governed by a voluntary code of conduct designed to refund victims, some consumer groups think this approach doesn’t offer sufficient protection for customers.

The current approach gives banks some wriggle room to interpret the rules differently, which leads to some victims getting a refund and others not, despite having similar circumstances.

With the law forcing banks to give a refund, banking regulators will also demand that the largest banks publish fraud reimbursements data.

The largest banks are the AIB Group (UK), Bank of Scotland, Barclays, Clydesdale Bank, the Co-operative Bank, HSBC, Lloyds, Metro Bank, Monzo, NatWest/RBS, Nationwide Building Society, Northern Bank, Santander, Starling Bank, TSB, Ulster Bank and Virgin Money.

If customers are more aware of the scale of fraud cases involving their bank and what proportion of victims are reimbursed, it could encourage them to change their behaviour.

With a total of £754 million lost to fraud in the first half of the year, APP scams represent a significant proportion of the amounts lost.

The plans are under consultation until January, and then the government can introduce new legislation in parliament.

Anabel Hoult, chief executive of consumer group Which?, called the move “a huge win for consumers”, saying:

“People are still losing life-changing sums of money every day, so the Treasury must move swiftly towards introducing the necessary legislation.”

Katy Worobec, managing director of economic crime at industry body UK Finance, said:

“Fraud has a devastating impact on victims and the money stolen funds serious organised crime, so the banking industry’s primary focus is always on stopping these scams happening in the first place.

“Over £300m has been reimbursed to thousands of customers since the APP voluntary code was introduced in 2019. We agree that more needs to be done and have long called for a regulated code, backed by legislation, to ensure consumer protections apply consistently.”

Worobec also said that social media platforms need to play their part in tackling fraud too.