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Firms told to improve money transfer scam refund process

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01/05/2020
A review of the way lenders handle refund claims of customers who fell victim to a money transfer scam has highlighted areas for improvement.

Authorised Push Payment (APP) scams are where consumers are tricked into transferring money to a seemingly genuine account but it is in fact controlled by a fraudster.

Under a voluntary code launched in May 2019, a number of banks and building societies committed to reimburse customers where the scam falls under a ‘no blame’ scenario for both the provider and saver.

The Lending Standards Board (LSB) which is responsible for ensuring firms adhere to the voluntary code, undertook a review of the scheme to see how firms are implementing the refund measures.

While it noted all firms have taken positive steps to implement the code for reimbursing scammed customers, key areas for improvement were identified, relating to the process, identifying vulnerability, effective warnings, record keeping and the need for a more consistent approach.

LSB found decisions about reimbursement weren’t always made in light of full circumstances of the case and were “often driven by narrower process considerations”. It saw evidence of firms being heavily reliant on a checklist process for apportioning blame, resulting in claims being declined without being fully considered.

It said identification of vulnerability of customers’ susceptibility to scams “was not very well developed”, adding that questioning of customers who reported falling victim to a scam was often closed and didn’t allow for the clear identification of any vulnerability.

On record keeping, LSB found that documentation of the rationale for the decision to decline reimbursement varied across firms and at some was non-existent. Customers themselves were often not informed of how a decision had been taken to deny reimbursement and were often given no opportunity to address the grounds on which the firm was holding them liable for the success of the scam.

However, in some cases it saw that where a customer was held completely or partially liable, they were referred to a team leader for a further check prior to the decision being recorded. It also praised teams for improving their skillset since the voluntary code was implemented last year.

Emma Lovell, chief executive of the LSB, said: “Our review shows areas of good practice and strong evidence that, when applied correctly, the code is working. Where improvements need to be made, we have issued recommendations to individual banks and these are currently being worked through by firms. Fundamentally, we want to see banks taking all of the required steps to protect consumers, while ensuring fair outcomes for those that fall victim to a scam. Banks have reaffirmed their commitment to this.”

To date, nine banking brands have signed up to the voluntary scheme: Barclays, Co-Operative, HSBC, Lloyds, Metro, Nationwide Building Society, NatWest, Santander and Starling Bank.

Estimates suggest consumers have lost £1bn to authorised push payment (money transfer) scams in the last three years.

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