Fraud fund to pay back bank transfer scam victims extended again

Fraud fund used to pay back blameless scam victims extended AGAIN as squabbling banks can’t decide on a long-term solution

  • Seven banks including the UK’s biggest names have been funding a central pot
  • This was initially due to run out at the end of 2019 and be replaced
  • Banks cannot decide on a long-term solution to pay back fraud victims and this temporary pot has now been extended twice 

Banks have once again failed to come up with a long-term solution to pay back blameless fraud victims and will continue to fund a pot of money until the end of this year, it has been revealed.

It means the pot, funded by seven banking groups accounting for most UK current account customers, will now have been funded for a whole year longer than it was initially meant to.

The supposedly temporary solution is due to continue until the end of 2020 as banks squabble over a replacement.

Squabbling: This is Money was told last November that a long-term solution to fund a central pot to pay back fraud victims should have been resolved, but banks have disagreed on it

The fund is used to pay back victims of scams where customers transfer money into the bank account of a fraudster, in situations where neither they nor any involved banks are at fault.

It accompanied a new code of practice which came into force last May, which said blameless victims should be reimbursed. 

The amount of money returned to fraud victims under the code will be published by trade body UK Finance separately to its fraud statistics, which found consumers lost £208million to these authorised push payment scams in the first half of 2019.

UK Finance says: ‘The payment service providers who have provided the interim funding since the code launched on 28 May 2019 have agreed to continue doing so until the end of this year to allow more time for regulators, government and industry to deliver a long-term, sustainable funding arrangement.’

The seven banks are Barclays, HSBC, Lloyds Banking Group, Metro Bank, Nationwide, Royal Bank of Scotland and Santander. The Co-op Bank and Starling have also signed up to the code.

However, the news this ‘interim funding arrangement’ has been extended yet again is embarrassing for the banks involved, given that a long-term solution was supposed to have been devised before the pot ran out in December 2019.

This is Money was told in November last year that the issue of funding the pot was expected to be resolved, but plans to pay for it with a 2.9p levy on faster payments over £30 were sunk after a revolt by challenger banks including Monzo and Transferwise.

It means that banks are continuing to refund fraud victims themselves as no solution can be found.

Stephen Jones, chief executive of UK Finance said: ‘The banking and payments industry is committed to defending their customers from fraud and stopping stolen money from going to criminals. 

‘The APP scams voluntary Code has set stronger standards for payment service providers to help protect customers; however there is a responsibility on all industries, not just banking and payment providers, to do more to stop these criminals from being able to target customers.

‘There is strong agreement across our sector that the development of any sustainable funding solution to compensate victims of scams must also include those third-party organisations whose data and platforms are used by criminals to facilitate fraud. 

‘The agreement to continue the interim funding arrangements until the end of this year gives important time for this to be agreed and implemented.

‘We share the views expressed by the Treasury Committee and Which? that issues of liability and reimbursement should best be addressed by new laws rather than just a voluntary code alone.’

Gareth Shaw, head of money at consumer group Which?, said: ‘While this latest extension will provide some short-term breathing space, it only exposes how far away the industry and regulators are from finding a permanent solution for reimbursing innocent bank customers who fall victim to scams.

‘A voluntary industry-led approach is not a long-term solution to the problem.

‘The Government must consider directing 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.’

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