Australian banks should reimburse scam victims, ACCC and consumer advocates say

‘Glaring lack of regulations’ means Australia is a ‘wild, wild west’, Consumer Action Law Centre policy officer says

In October 2021, Anne, a Victorian education consultant, lost almost $100,000 within 48 hours after scammers hacked her email, posed as her and directed her clients to pay invoices into a different account.

“[My client] rang me and said, ‘Did you get the money?’ I said no. But the bank said it was too late, it was gone,” says Anne, who is using a pseudonym for privacy reasons.

Anne might have got her money back had she been in the UK, where some financial institutions have signed up to a voluntary code meaning banks should refund the money unless a customer acted fraudulently or with “gross negligence”.

Banks in Australia don’t have the same kind of code and, with thousands in the country falling victim to scams, the country’s competition regulator and the Consumer Action Law Centre are pushing for Australia to adopt a similar approach to the UK.

Last year more than 239,000 scams worth $570m were reported to Scamwatch, with false billing scams the second most common type reported. The organisation says this is just the tip of the iceberg, estimating that only 13% of all scams get recorded, and says someone who is scammed is unlikely to get their money back.

Tom Abourizk, a policy officer at the law centre, says the “glaring lack of regulations means [Australia is] a wild, wild west”.

“[The UK approach] establishes an onus on the banks, they have a financial interest to make sure their systems are up to scratch,” Abourizk says.

Despite banks investing money in cybersecurity, he says, there are still regular cases where “transactions that would raise alarm bells” are not being properly checked.

“That makes it hard for people to get their money back. The standards of care set for the banks are really low right now. At the end of the day they don’t have the responsibility.”

Abourizk says the onus on the individual to completely protect themselves is unfair, considering that the bank’s job is to keep money safe.

The Australian Competition and Consumer Commission also wants to see a model that would require banks to reimburse scam victims.

“The ACCC considers that reimbursement models should apply particularly in situations where an organisation has failed to take steps that could have protected the consumer or prevented a scammer opening an account,” a spokesperson said.

It also wants banks to implement confirmation of payee (CoP) technology, which is used in the UK to reduce accidentally misdirected payments by checking the name of the payee’s account against other details given by the payer. The technology puts the onus on banks to check, compared with PayID, which is used in Australia and which puts the onus on the consumer.

In the first year CoP was adopted in the UK it cut misdirected payments by 35%, according to the ACCC.

The Australian Banking Association did not respond to a request for comment on whether a model putting onus on banks to reimburse scam victims should be introduced in Australia.

An ABA spokesperson said banks covered almost $103m in customer losses in 2021, while financial institutions reported to the ACCC that they prevented or recovered nearly $341m from scammers in that period.

The ABA said customers should use PayID, which helps protect transactions against scammers, saying the “banking industry is actively encouraging consumers and merchants to use this system”.

Last year Australian banks fought a push from consumer advocates to refund scam victims, telling the Australian Securities and Investments Commission it risked creating complacency among customers.

The federal government pledged during the election to bring in a tough new code for banks. But at a conference last year, the financial services minister, Stephen Jones, pushed back on the idea banks should be liable for losses.

“There should be a high bar on what is expected by all of our institutions – but if they meet all of their obligations it doesn’t seem right that they are liable,” he told the conference. “If banks always pay the net result creates a honey pot for scammers.”


Cait Kelly

The GuardianTramp

Related Content

Article image
Australia should force banks to repay scam victims and adopt better protections, advocates say
Calls for federal government to mandate the checking of account details before money transfers are made

Cait Kelly

12, Feb, 2023 @2:00 PM

Article image
Australian banks urge Albanese government to ban use of credit cards for online gambling
‘Why should it be possible to do something in the virtual world that is prohibited in the real world?,’ Anna Bligh says

Henry Belot

27, Mar, 2023 @12:00 AM

Article image
How to not get caught in the million dollars a day of scams in Australia
With little chance of getting money back if you are a victim, take these measures to protect yourself from unsolicited calls, texts and emails

Cait Kelly

30, Jan, 2023 @2:00 PM

Article image
Australian banks announce new anti-fraud platform to help quickly freeze scam payments
Move adds to ‘arsenal of anti-scam initiatives’ as consumer rights groups call for laws to see banks reimburse victims

Cait Kelly

15, May, 2023 @3:00 PM

Article image
Australians report record $3.1bn losses to scams, with real amount even higher, ACCC says
Investment fraud amounts for biggest share at $1.5bn, followed by remote access and payment redirection rorts

Cait Kelly

16, Apr, 2023 @8:00 PM

Article image
Australian banks predict another interest rate rise despite hopeful investor outlook
Big four banks believe RBA will lift cash rate by at least another 25 basis points though many predict rises are close to a peak

Peter Hannam

24, Mar, 2023 @10:42 PM

Article image
Australian Taxation Office to force banks to hand over landlord data in investment property crackdown
Exclusive: Incorrect reporting of rental property income and expenses, and failure to declare capital gains are all in the spotlight

Paul Karp Chief political correspondent

11, Apr, 2023 @3:00 PM

Article image
Retailers’ extended warranties give no more cover than existing consumer rights, Choice says
Consumer group found 91% of stores it investigated tried to sell extended warranties and claims 71% provided misleading information

Natasha May

22, Nov, 2022 @1:59 PM

Article image
NAB to introduce buy now, pay later product placing further pressure on existing operators
Standalone operators feel burden of rising interest rates and slowing growth as third big Australian bank enters BNPL scene

Ben Butler

26, May, 2022 @5:32 AM

Article image
Labor government locks in compensation scheme for financial misconduct victims despite ‘god-like powers’ warnings
Minister for financial services says government’s accountability regime is ‘locked and loaded’ and will not be changed

Paul Karp

27, Oct, 2022 @3:00 PM