Smaller banks refuse to set up a fund to help fraud victims leaving millions with compensation nightmares
MILLIONS of Brits risk compensation nightmares after some of the UK's smaller banks refused to back a central fund to help fraud victims.
Major banks including Barclays, HSBC, Lloyds Banking Group and NatWest currently pay into a fund used to reimburse people who've lost money in so-called authorised push payment (APP) fraud.
That fund is due to run out on December 31, and the banking industry has scrapped the latest proposals on how to keep it going.
UK Finance had suggested a 2.9p transaction fee on all bank transfers over £30, which could be passed on to customers.
But the fee idea has been rejected by two thirds of banks in a consultation by Pay.UK, the UK's payment scheme operator.
Although, Pay.UK found that a majority of payment service providers supported the idea of reimbursing customers in the "no-blame" scenario.
If no solution is found before the end of this year, it'll be up to each bank individually to decide whether to reimburse customers who've been victims of fraud.
How to protect yourself from fraudsters
ACTION Fraud recommends taking the following advice to stay safe:
- When making a purchase, be suspicious of any requests to pay by bank transfer or virtual currency instead of safer methods, such as credit card or payment services such as PayPal.
- Listen to your instincts: If something feels wrong then it is usually right to question it. Don’t pay for goods or services unless you know and trust the individual or business.
- Personal information obtained from data breaches is making it increasingly easier for fraudsters to create highly targeted phishing messages and calls - watch out for these.
- You shouldn’t assume the caller is genuine just because they’re able to provide some basic details about you.
- Always be suspicious of unsolicited requests for your personal or financial information.
APP scams happen when someone is tricked into transferring money directly into a fraudster's bank account, often because the criminal is posing as a legitimate organisation.
In the first half of this year, Brits lost a whopping £147million to this type of fraud, yet only 17 per cent was refunded.
Previously, scam victims who had done nothing wrong had no automatic right to get their money back from their bank - as they had authorised the transfer.
But a voluntary industry code was introduced in May which makes it easier for victims who have done nothing wrong, and neither has their bank, to get their money back in "no blame" situations.
Yet smaller banks including challenger Monzo, which has more than three million customers, is against the central fund proposals.
Monzo's chief executive Tom Blomfield recently said its fraud rates were five times lower than the industry average as it had invested in better technology.
He added that asking start-up banks to contribute was like demanding a new company to pay for the pollution of old factories.
A spokesperson also told The Sun that while bigger banks would have been able to soak up the cost of the fee, it would have imposed an unfair cost on smaller firms.
They added that although it's rejected the current fund proposal, it's looking to sign up to the code in the first quarter next year.
The news comes as consumer group Which? warned last month that time was running out to find a long-term funding solution.
Jenny Ross, Which? money editor, said: "This is yet another missed opportunity to properly protect people against the devastating consequences of bank transfer fraud."
"It's clear that a voluntary, industry-led approach to protecting scam victims is not enough.
"The next government must work with the regulator to make the code and reimbursement mandatory - to finally ensure millions of people are no longer at risk of losing life-changing sums of money."
Stephen Jones, chief executive of UK Finance, said: "Ensuring victims of APP scams receive compensation when their money is stolen by criminals is an absolute priority for the payments industry.
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"UK Finance and the industry have been working closely with consumer groups to find a solution to this issue and to ensure that the cost of payment frauds are met by all those responsible, both within and outside the payments industry.
"We are therefore disappointed a way forward has not yet been agreed.
"We urge any future government to work together with the Payment Systems Regulator to put new laws in place quickly that ensure victims are protected and reimbursed."