Banks will be required to reimburse authorised push payment (APP) scam victims under government plans for a new bill.
The Financial Services and Markets Bill could help ensure that more people who are tricked into transferring money to a fraudster are reimbursed.
Currently, many banks have signed up to a voluntary reimbursement code, but there have been concerns about it being applied inconsistently.
Under this bill, the Payment Systems Regulator (PSR) will be able to require banks to reimburse authorised push payment.
The move, unveiled in the Queen’s Speech, comes as there has been an increase of such cases in recent years, with scammers often posing as officials working for banks, the police or HM Revenue and Customs (HMRC) to dupe their victims.
John Glen, economic secretary to the Treasury, said: “We are also sticking up for victims of financial scams that can have a devastating impact, by ensuring the regulator can act to make banks reimburse people who have lost money through no fault of their own.”
These scam losses reach hundreds of millions of pounds each year.
Laura Suter, head of personal finance at AJ Bell, said: “The latest figures show that despite the banking industry’s pledges to reimburse victims, for every £1 stolen only 43p was being returned to victims last year.”
She said the scale of the problem meant £355.3m was stolen in the first half of 2021 alone.
Suter said the bill “doesn’t mean every scam victim will definitely get their money back”.
She noted: “The regulator will come up with its own criteria for who can be reimbursed and who will be left to stomach their losses themselves. What’s certain to happen is that banks will beef up their checks and processes when anyone makes an online transfer if they are going to be the ones footing the bill for more of the fraud.”
Alice Haine, personal finance analyst at Bestinvest, said: “This type of fraud accounts for hundreds of millions of pounds in losses every year, with the person who has made the payment sometimes left high and dry.
“Because the payment is made in real-time, it has meant that the victim has no way to get the money back once it has been transferred — with the only option to try and claim it back through their bank.
"This can be an exasperating and time-consuming process that does not always lead to the result the victim wants — namely getting the money back.”
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The online safety bill will continue to proceed through parliament. The hope is the online safety bill will go some way to plug the flood of financial scams that have mushroomed during the pandemic or offer some protection against harmful content. However, the onus still falls on individuals to avoid financial harm — there is no getting around it.”
The bill will also ensure consumers have continued access to cash.
Cash remains an important payment method for millions of people across the UK, particularly those in vulnerable groups, and the government said it was committed to preserving it.
“Notes and coins still remain important to the daily lives of millions — particularly elderly people and those on low incomes who are cash dependent. As such, protecting access to cash infrastructure is crucial,” Jobson said.
According to the Post Office, £12bn was deposited and withdrawn over its counters in the first four months of 2022.
The Post Office has an agreement with many banks that enables people to do their day-to-day banking over its counters.