Victims of financial scams should not have to struggle to get their money back

We need to see the creation of a simpler and clearer standard of care when it comes to reimbursing those affected by such crimes, writes Rocio Concha

Financial scams have cost people thousands of pounds (PA Archive)

For a fraudster, the opportunities to trick people out of money are seemingly endless. There has been Brexit, where potential confusion over shipping costs under the terms of our new trading agreement led to people being duped into paying more that they needed to for deliveries, or for services that do not exist at all. Covid-19, where a slew of fake texts have been sent under the guise of public health guidance. And now it would appear that even humanitarian efforts to fundraise for victims of the Ukraine crisis are not off limits.

The common denominator between these types of scams is not just that they are despicably cruel, nor that they can have enduring impact on victims’ wellbeing – both of which are absolutely the case – but that they are often facilitated by what is known as “APP” (authorised push payment) or “bank transfer fraud”.

These kinds of scams happen when a person or business is tricked into sending money to a fraudster posing as a genuine payee. Which? first raised the alarm with a super-complaint five years ago, but a lack of swift, effective action from regulators and banks means they continue to spiral out of control.

The problem grows, despite most major banks signing up to a code that instructs them to reimburse victims when they are not at fault. That code is only voluntary and Which? has heard from many victims of APP fraud who have struggled to get their money back, even though the tactics used by fraudsters were so sophisticated that it was not reasonable to expect them to know they were being conned and behaved any differently.

Our analysis of figures from the trade association UK Finance show that between July 2019 and the end of June 2021, a total of £85m was lost across 306,573 cases of APP fraud. Less than half – 42 per cent – of losses were returned to the customer.

As a result, £495m has not been reimbursed, meaning customers have been left to shoulder net losses at a rate of £4.7m a week, £676,881 a day, or £28,203 an hour – more than the average UK worker earns in a year.

So where does this reimbursement lottery leave victims trying to get their money back after banks have refused their case? One route is to contact the Financial Ombudsman Service (FOS) who will review the claim. This doesn’t guarantee success, however – and is a process that can take years, further prolonging the agony.

Thankfully, the government has now committed to legislate to provide for mandatory reimbursement. But we do not yet know when this will happen or what it will look like in practice. Which? wants to see the creation of a simpler and clearer standard of care when it comes to reimbursing victims. That doesn’t mean every victim will, or indeed, should, get their money back. But what the legislation must do is make it much clearer when firms should reimburse a customer, and then the regulator must implement and enforce this across all payment providers – to ensure victims are treated more fairly and consistently.

There can be no delay to this legislation and from the moment it comes into force, the PSR must be ready to protect victims. It must also move quickly on plans to publish data that shows how well banks are doing at preventing and responding to fraud, as well as how often they reimburse victims. This will encourage banks that are performing poorly to clean up their act.

The feeling of being scammed is bad enough. Victims talk not only of losing money, but confidence, self-esteem and a sense of self worth. It is even worse when your own bank doesn’t believe you and tries everything in its power to refuse what is rightfully yours.

Rocio Concha is director of policy and advocacy at Which?