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More help for push payment fraud victims

Paloma Kubiak
Written By:
Paloma Kubiak

People who are tricked into transferring money to fraudsters may have a better chance of getting their money back under new proposals from the city regulator.

A growing number of consumers are falling victim to these crimes, known as Authorised Push Payment (APP) scams.

They are tricked into authorising a transfer of money from their account to another account which they believe belongs to a legitimate payee. Often an email requesting money, such as from a solicitor or builder, is intercepted by a fraudster, and only later is the scam revealed.

According to UK Finance data, there were 43,875 cases of APP fraud and total losses of £236m in 2017. Of these cases, 88% involved consumers who lost on average £2,784 per case but financial providers have returned just £60.8m of the losses.

Part of the problem is that victims of APP scams aren’t protected in the same way as those targeted by other fraud. Currently, victims can only complain to their own bank about the fraud. They don’t necessarily get their money back.

But under proposals announced by the Financial Conduct Authority (FCA), consumers will be able to complain to the recipient’s, i.e. the scammer’s bank.

In the past, recipient account providers have often cited data protection reasons as to why details cannot be given, and money returned.

But under the proposals, if the victim receives an inadequate response or no response from the scammer’s bank provider, they then have the option to take their complaint to the Financial Ombudsman Service, which adjudicates cases between consumers and financial service providers.

While the Ombudsman already has the power to look at APP problems, it can only look at the complaint from the perspective of the customer’s bank, whether the bank did enough to prevent the scam taking place. The proposals clarify the Ombudsman powers in looking at whether both providers have done enough for the victim.

If it finds the bank didn’t do enough to stop the fraud, it can ask for compensation to be paid to the customer.

Ultimately, it is hoped this means a step towards victims receiving their money back, though this will depend on the individual circumstances.

Christopher Woolard, FCA executive director of strategy and competition, said: “The FCA takes push payment fraud and the harm it causes to consumers very seriously. Our proposals build on our work in this area, and seek to reduce the harm experienced by victims of push payment fraud where they believe the bank that received the money did not do enough to prevent it.

“We are proposing to require payment service providers to handle complaints about this in line with our complaint handling rules, and to provide the victims with access to the Financial Ombudsman Service.”

The consultation ends on 26 September 2018.

Separately, the Payment Systems Regulator announced in February that a steering group will be set up to design a standardised reimbursement model to clarify the circumstances where victims can receive their money back.