Over three-quarters of bank customers have been unable to secure reimbursements after becoming victims of authorized push payment (APP) scams.
In 2020, losses from bank transfer fraud reached £479 million, yet the reimbursement rates remained alarmingly low. In the first 14 months following the introduction of a Contingent Reimbursement Model and a voluntary code, banks deemed victims at least partly responsible for their losses in 77% of assessed cases. Notably, two banks found customers fully liable in more than 90% of decisions.
Data from the Financial Ombudsman Service (FOS) reveals that banks often misjudge these cases, with 73% of complaints regarding APP fraud being upheld in favor of consumers during the 2020-21 period. This contradicts the established code, which stipulates that victims should be reimbursed unless the bank can prove that the customer lacked a ‘reasonable basis’ for believing that the recipient of the funds was legitimate.
Consumer group Which? is urgently calling on the Payment Systems Regulator (PSR) to take stronger action to protect victims and ensure fair reimbursements. An announcement from the PSR regarding enhancements in consumer protections against APP fraud is expected soon. One proposed measure could involve mandating minimum standards for reimbursements through changes to payment system rules.
Which? highlights a specific case involving a First Direct customer who was denied full reimbursement for £180,000 lost to an investment scam, primarily because he failed to check online reviews. At the time of the scam, the trading platform in question, Grandefex, had nearly equal ratings—43% excellent and 47% bad—on Trustpilot. Grandefex is now under a Financial Conduct Authority (FCA) scam warning, although this occurred long after the investment was made.
Additionally, First Direct took over 35 days to reach a decision regarding the reimbursement, despite their requirement to respond to claims within 15 working days, or 35 days in exceptional cases. During this delay, the victim was not alerted to the risk of identity fraud, given that scammers had obtained his passport and recent bills. Which? has now suggested he escalate his case to the Financial Ombudsman Service (FOS).
Jenny Ross, a money editor at Which?, emphasizes: “The payments regulator must introduce mandatory and clearer reimbursement requirements for all payment providers to ensure that customers are treated fairly and consistently when they fall victim to a bank transfer scam. They need to collaborate with the government quickly to gain the necessary powers to implement this.”