Consumers across the UK are losing more than £700,000 every day to bank transfer scams, according to new research.
An investigation by Which? revealed the concerning impact of scams and called for stronger protections for bank customers.
Figures from UK Finance show that £412.9 million has been lost across 189,000 cases of bank transfer fraud between the introduction of industry codes on reimbursement in May 2019 and the end of 2020.
According to the consumer rights group, this equates to £707,000 a day, £29,000 an hour or £491 a minute.
However, research also revealed that less than half (46%) of losses have been reimbursed under the new code. Subsequently, nearly £225 million has not been returned to victims, meaning consumers have been left with net losses at a rate of £384,000 a day.
The reimbursement code, which banks helped to design, has now been in force for nearly two years. Despite this, Which? insisted that the “huge sums of money being lost” highlights systemic issues with protections for this specific type of fraud.
The code outlines that if a customer is not at fault then they should be reimbursed. However, the Financial Ombudsman Service (FOS) and various consumer advocates found that banks are deciding not to return their losses.
In many instances, investigations found that victims are subjected to highly sophisticated tactics used by fraudsters. Additionally, banks were often found to have not adequately informed customers about the threat of being scammed.
Which? said these factors show that existing approaches to tackling bank transfer scams is not sufficient.
The consumer rights group has called for changes so that mandatory standards of consumer protection are introduced to provide “fairer and more consistent outcomes” for victims of bank transfer fraud.
Long-term, regulators must be able to effectively enforce standards to ensure that firms do not place blame on consumers to avoid reimbursing money – an issue which the group said is growing.
Figures published by the Lending Standards Board show that banks signed up to the code hold victims fully or partially responsible for being scammed up to 77% of the time.
Similarly, rulings published by the Financial Ombudsman Service also show that in some cases, banks are setting “unrealistic expectations” on customers to spot and prevent fraud.
This includes a Bank of Scotland customer who lost £27,000 after falling victim to an investment scam that involved making payments to a cloned company via telephone banking.
On this occasion, Bank of Scotland denied reimbursement. However, the Ombudsman upheld the customer’s complaint after finding the bank missed “three clear opportunities” to discuss the transfers before they were completed.
As such, it was believed that the customer would not have made the payments at all if provided with warnings.
- Could Edinburgh become the ‘space data capital’ of Europe?
- What are the top cybersecurity tips for small businesses?
- Openreach to bring ultrafast broadband to 300,000 homes across Scotland
According to Which? there is now “mounting evidence” that suggests that some of the banks that helped create the code are now “choosing to interpret it” in a manner that enabled them to avoid reimbursing victims.
The Payments Systems Regulator (PSR), which has admitted that reimbursement rates are low, said it is exploring new measures that could help reduce losses to this type of crime.
“Which? strongly backs proposals from the PSR to change the rules of the Faster Payment Scheme, to set mandatory standards for the reimbursement of those conned out of their money, and believes the Treasury must commit to giving the regulator whatever powers it needs to make that happen,” the consumer group said.
Greater transparency of how banks handle cases of bank transfer fraud is also needed, Which? said. Ensuring this will help consumers establish how their bank chooses to treat victims of crime.
Gareth Shaw, Head of Money at Which? said: “Despite huge sums being lost on a daily basis, low reimbursement rates based on inconsistent and unfair decisions by firms demonstrate how the voluntary code isn’t providing the safeguards promised to victims of bank transfer scams.
“Two years on from the code’s introduction, it is clear that the Payment Systems Regulator must now take decisive action to prevent the continued devastation caused by this type of fraud.”
Shaw added: “It needs to introduce mandatory standards of consumer protection for all banks and payment providers, and require greater transparency from firms on how they are dealing with this crime.”