MPs say banks should compensate more victims of payment scams

Tom Belger
Finance and policy reporter
The government and banks should protect fraud victims, according to MPs. Photo: PA

Banks should consider refunding more customers who fall victim to certain kinds of payment fraud, according to MPs.

A new report warns fraud is the second most common crime in England and Wales, and described economic crime as a “serious and growing problem.”

It said fraudsters had taken more than £600m in the first half of 2019 alone with scams getting “ever more sophisticated,” from romance fraud to posing as internet providers.

But the report by the cross-party Treasury committee says “authorised push payment” is a new and growing issue.

It involves consumers being tricked into processing payments themselves into accounts controlled by criminals, often using “high pressure tactics” to convince them to do so quickly.

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The practices have sparked controversy over whether banks should refund the victim, as they have unwittingly authorised the scam rather than had their account broken into.

MPs say some banks do not reimburse customers who made payments by entering a correct recipient’s name but incorrect account details provided by fraudsters.

“To date fraudsters have relied on the account name not being matched to convince consumers to transfer money. This continued despite banks knowing this was a weakness in the system,” according to MPs.

MPs were critical of banks for not reforming payment systems sooner, which typically only check account details and do not check the name of the payee.

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A scheme which does check and match account names and details is due to be rolled out, but not until March 2020. Banks should face penalties if they fail to implement it on time, the MPs say.

Many financial firms have also signed up to a new code of practice over reimbursing customers, but it is voluntary and do not have to reimburse customers they believe were ‘grossly negligent,’ which is not defined.

MPs wrote: “It should now be made compulsory, and firms should consider retrospectively reimbursing customers back to 2016.

“We strongly encourage firms to consider whether refusing to retrospectively reimburse customers who relied on the payee name is fair and just. We especially encourage this where the customer would now fall into the code’s definition of vulnerability.”

Another recommendation by MPs was for a 24-hour delay for all payments to new recipients, letting consumers “remove themselves from the high-pressure environment in which they are being manipulated.”

Fraud is a 'serious and growing problem.' Photo: Matt Cardy/Getty Images

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Gareth Shaw, head of money at consumer group Which?, said a lack of swift action had “allowed fraudsters to steal hundreds of millions of pounds – causing untold misery for thousands of victims.”

He told PA most big banks had signed up to the code, and backed calls to be made compulsory.

A UK government spokesman said: “Tackling fraud is one of our top priorities and our approach has made us a global leader in fighting it. But we know there is more to do.

“That’s why in the summer we published our economic crime plan, bringing together law enforcement with the public and private sectors in closer cooperation than ever before, to take on dirty money and ensure we maintain this position.

“We will respond to the committee’s report in due course.”