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Banks called to account over "shockingly low" rate of reimbursements for APP fraud

Banks called to account over "shockingly low" rate of reimbursements for APP fraud

Over three quarters of bank customers have failed to win reimbursements from banks after falling victim to authorised push payment scams.

Losses to bank transfer fraud soared to £479 million in 2020, while reimbursement rates remain low - banks found victims at least partly responsible for their losses in 77% of cases assessed in the first 14 months following the introduction of a Contingent Reimbursement Model and voluntary code. Two banks found the customer fully liable in more than nine in 10 decisions.

Financial Ombudsman Service (FOS) data also indicates that banks are getting most of these decisions wrong, with 73% of complaints about APP fraud being upheld in favour of consumers in 2020-21.

This is despite the code clearly stating that victims should be reimbursed unless the firm can establish that their customer did not have a ‘reasonable basis’ for believing the person or organisation they are sending money to is genuine.

Consumer group Which? is urgently calling on the Payment Systems Regulator to ensure banks do more to protect victims and provide them with fair reimbursement.

The PSR is due to make an announcement imminently on how to improve consumer protections against APP fraud. One option on the cards is to make reimbursements mandatory at a minimum standard by changing payment system rules.

Which? cites the case of a First Direct customer who been denied full reimbursement for his £180,000 losses to an investment scam because he did not check online reviews. This is despite the trading platform having nearly as many excellent ratings (43%) as bad (47%) on Trustpilot at the time of the scam.

The platform he invested with - Grandefex - is now subject to a Financial Conduct Authority (FCA) scam warning, but this came long after he invested.

First Direct took more than 35 days to reach a decision (banks should respond to reimbursement claims within 15 working days or 35 in ‘exceptional cases’) and during this time failed to warn the victim that he was at risk of identity fraud because the scammers had copies of his passport and recent bills. Which? advised him to take his case to the Financial Ombudsman Service (FOS).

Jenny Ross, Which? money editor, says: “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 must work quickly with the government to get the powers they need to deliver this.”

Comments: (3)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 16 September, 2021, 14:53Be the first to give this comment the thumbs up 0 likes

I fail to see how money sent to a scam investment firm can be a form of APP fraud?

Next what, if I buy a stock and it goes down, can I claim APP fraud and demand to get back the money I sent to my broker?

For the merchant, one of the main advantages of A2A payments (like FPS, UPI) is irrevocability. The way APP regs are progressing, I see A2A slowly morphing into a revocable method of payment and thereby losing one of its USPs against credit card payments.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 16 September, 2021, 14:54Be the first to give this comment the thumbs up 0 likes

I fail to see how money sent to a scam investment firm can be a form of APP fraud.

Next what, if I buy a stock and it goes down, can I claim APP fraud and demand to get back the money I sent to my broker?

For the merchant, one of the main advantages of A2A payments (like FPS, UPI) is irrevocability. The way APP regs are progressing, I see A2A slowly morphing into a revocable method of payment and thereby losing one of its USPs against credit card payments.

Dave Birch
Dave Birch - Tessier Ashpool S.A. - Guildford 22 September, 2021, 22:18Be the first to give this comment the thumbs up 0 likes

"a First Direct customer who been denied full reimbursement for his £180,000 losses to an investment scam"

Why is this First Direct's fault? Please explain.

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