Banks should not be liable for transfer fraud

16 December 2016

Banks should not be liable to cover the losses of consumers who are tricked into making payments into fraudster’s accounts.

This is the conclusion of the Payment Systems Regulator’s (PSR) response to a super complaint from consumer group Which? in September, that called on banks to improve protection for consumers who are tricked into transferring money to fraudsters.

Although banks employ numerous checks to ensure transactions made with credit or debit cards are not fraudulent, consumer protection charity Which?, claimed that security on bank transfers have not kept pace. It also said that banks needed to take more responsibility for the losses of consumers who lose money in this way.

Currently, people that are victims of fraudulent credit or debit card transactions are protected by their bank, unless they have been negligent with their security details. However, the same does not apply for fraudulent bank transfers – known as authorised push payments.


The Which? complaint gave the PSR 90 days to respond. Following research conducted during that period, it says it has identified a number of issues. Firstly it says that the ways in which banks work together to tackle this type of fraud needed to be improved. Secondly it found some evidence that banks could do more to identify fraudulent incoming payments, and finally it said that data regarding the scale and type of this sort of scam is of poor quality.

However, while the PSR said it would work with Financial Fraud Action UK to tackle these issues, it does not believe banks should be forced into compensating victims.

It says: “We have concluded that there was not sufficient evidence to justify a change in liability, i.e. making banks liable for reimbursing victims of APP scams, and we are aware of the possible unintended consequences of doing so.

“However, we did note that, as work progresses and additional evidence comes to light, we will consider whether it is appropriate to propose changes to the obligations or incentives that banks have for these types of scams.”


‘Letting banks off the hook’

Following the publication of the PSR response, Which? said that it was ‘letting banks of the hook’.  Alex Neill, managing director of Which? home and legal services says: “The regulator has finally acknowledged the considerable consumer harm caused by bank transfer scams. However, while recognising that the industry is not doing enough, it has failed to adequately address the issue of liability and has let the banks off the hook, giving them little incentive to do more to protect their customers.


“The outcome for people is unfortunately that they will continue to be scammed out of millions of pounds. We need to see swift action and not see this kicked into the long grass in the second half of 2017.”

In the two weeks after Which? launched an online scam reporting tool, 650 people reported losses from bank transfer scams totaling £5.5 million. The average loss was £1,200, but the largest single loss was close to £400,000.


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