Banks warned against scrapping protections for online shopping scam victims

Banks have been warned against watering down fraud protections for consumers amid fears they want to stop refunding those who fall victim to common online shopping scams.

The watchdog which oversees an industry code stating fraud victims should be refunded if they are scammed told This is Money removing ‘any of the protection measures around authorised push payment scams could expose customers to significant financial risk, in addition to the emotional distress that so often comes with victims’ personal experiences of fraud’.

The Lending Standards Board added how much money victims lost in a scam ‘should not be a metric when determining whether customers are reimbursed’, amid reported concerns among banks that paying back victims of online shopping fraud was not what the anti-fraud code, introduced in May 2019 and signed by nine banks, was designed for.

Blameless victims defrauded while online shopping are currently supposed to be reimbursed 

The remarks come as the LSB prepares to release a review into how the code is operating. 

A previous report released in December found banks were still providing customers with generic fraud warnings when they went to transfer money.

Purchase scams, which see victims scammed when online shopping, made up more than half of all reports of authorised push payment fraud in the first half of last year, with 37,156 cases reported to the trade body UK Finance. 

APP scams occur when victims send money directly to a fraudster.

Shoppers were scammed when trying to purchase pets, PPE and home coronavirus testing kits, as well as cars and games consoles among other items, UK Finance found. 

Meanwhile, This is Money has previously reported that there was a rise in purchase scams involving caravans and hot tubs last year.

Victims lost £27.1million with the average loss £729. However, despite UK Finance finding ‘a steady rise’ in these scams, with cases up 6 per cent year-on-year as criminals cashed in on the coronavirus pandemic, banks reportedly wish to reduce the protections offered to victims.

Currently, those deemed blameless are supposed to be reimbursed from a central pot funded by Britain’s biggest banks.

But minutes from a meeting of the UK’s biggest banks in November arranged by UK Finance and reported by The Sunday Times stated the banking industry ‘do not think purchase scams should be within the scope of the code and believe that they weaken its purpose by distracting focus away from the life-changing events of other scam types.’

Starling chief executive Anne Boden said refunding online shopping scam victims was ‘not what the authorised push payment scam code was intended for’ 

The founder and chief executive of Starling Bank, Anne Boden, echoed this view in a blog post last week. 

She wrote: ‘Banks seem to have become the underwriter of all kinds of fraud that are not really financial fraud at all.

‘If a consumer buys a pair of trainers online from a site advertised on a social media platform that takes their money and runs, this is not financial fraud, it’s purchase fraud. Yet the banks are the ones asked to repay the customer for the non-existent trainers.

‘We fully support the code that we signed up to last year to help customers hit by scams. But this kind of scam is not what the code was intended for.’

Banks including Starling believe social media companies should bear more responsibility for fraudulent adverts posted on their platforms, while they also feel purchase scams involving smaller sums of money than other types of push payment fraud like impersonation and romance scams should not be covered by the code.

Boden pointed to UK Finance figures which found 45 per cent of cases of purchase fraud involved sums of less than £300, while another high street bank has received claims for as little as 1p.

But the LSB hit back against this. In comments made to This is Money, a spokesperson said purchase scams ‘pose a significant threat to customers and are becoming more sophisticated by the day. 

‘The level of money lost per scam should not be a metric when determining whether customers are reimbursed. After all, what is a life changing sum of money to one person is not necessarily to another.

‘What’s important is that each customer case should be reviewed on its own merit, and they should receive the level of protection needed to help prevent them becoming a victim of the scam, regardless of the amount of money in question.’

The LSB has been working with banks on their fraud warnings, as well as on a wider review of the push payment scams code which will be published later in January.

This is Money asked UK Finance whether it agreed with the LSB’s view or Anne Boden’s, but did not receive a response by the time of publication.

This post first appeared on Dailymail.co.uk