People who have been conned into authorising their bank to pay a fraudster could find it easier to get compensation, under plans being put together by the regulator.
The Payment Systems Regulator is trying to devise a way to reimburse victims of authorised push payment (APP) scams.
In the first half of this year, 19,000 victims lost £100m to APP scams.
One such, Kate Blakeley, described the “sheer horror” of discovering the loss of almost £300,000 through such a scam.
Ms Blakeley, who was in the process of buying a house with her partner, described her experience. She thought she was transferring money to the right account, but it was in fact one controlled by a fraudster.
“Everything had gone very smoothly,” she said. “Our conveyancing solicitor provided details by email of the bank accounts to make the money transfers on the day of completion.
“We transferred just under £300,000 on the day and within about three hours, we realised the money had gone missing.
“The moment of realising the money hadn’t arrived as intended with the bank account we sent it to, or thought we’d sent it to, was just sheer horror.”
Ms Blakeley did get all the money back eventually, but lost thousands in solicitors’ fees. The matter is still subject to a legal dispute.
‘No silver bullet’
The PSR’s has been investigating APP scams following a super-complaint by consumer body Which?.
The regulator said “good progress” was being made in a number of areas and it hoped a compensation system would be in place by September 2018.
As well as starting to record and understand the scale of APP scams, the PSR will also introduce new standards for banks to follow when a victim reports such a scam, which should improve victims’ experience and banks’ response times.
However, PSR managing director Hannah Nixon warned that not every scam could be prevented.
“There is no silver bullet for APP scams, and some people will still, unfortunately, lose out,” she said.
“That’s why we’ve continued to look for a solution that could reimburse those who are scammed, and today we begin consulting on an option that we think could work.”
She added that account holders also needed to take “an appropriate level of care” in protecting themselves.
How to protect yourself against “push” fraud
When you transfer money from your bank account, you are asked to enter three pieces of information: the name of the payee, their account number, and the sort code. However, only the last two are cross-checked by the bank. So putting in the correct name is no guarantee that person will get the money.
Financial Fraud Action UK offers the following advice:
Never disclose security details, such as your PIN or full banking password
Don’t assume an email, text or phone call is authentic
Don’t be rushed – a genuine organisation won’t mind waiting
Listen to your instincts – you know if something doesn’t feel right
Stay in control – don’t panic and make a decision you’ll regret
The Financial Conduct Authority (FCA) has reviewed the way banks handle APP scams.
It found banks’ procedures were inconsistent, their existing fraud detection systems could not easily detect APP scams, and they did not collect enough data.
However, the FCA considers the industry initiatives underway will help to tackle these issues.
Peter Vicary-Smith, chief executive of Which?, said: “It’s good to see the regulator coming down on the side of consumers. If this stops the huge amounts of money lost to bank transfer scams, it’ll be a significant win.
“To make this a reality, the regulator must now ensure any reimbursement scheme properly compensates victims. Meanwhile, banks must move to quickly put in place better checks and protections to prevent these scams happening in the first place.”