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Creditfix LB 03-2017

Consumers Losing Out on Bank Transfer Fraud

Consumers and businesses are losing out on bank transfer fraud, with around ?236 million being obtained by fraudsters during 2017 but only about a quarter (?60.8 million) being returned to the victims.

Data released by UK Finance has revealed that there were 43,875 cases of authorised push payment (APP) scams reported in 2017.

APP scams are where people are tricked by fraudsters posing as officials from banks, utility or telecom companies, solicitors, or even the police.

Thanks to the fraudsters either knowing or managing to guess details of their victims, they are able to persuade people to transfer funds, often by saying that ‘suspicious activity’ has been seen on their bank account so savings should be moved to a ‘safe’ account.

Most victims of APP fraud tend to be individuals, who lost an average of ?2,784 each in 2017. Businesses suffered greater losses of ?24,355 per case, on average.

Unlike unauthorised payments or scams on credit and debit cards where banks must reimburse customers unless the victim is deemed negligent, APP scams involve authorised payments allowing the banks to refuse refunds as they can argue that the payment was authorised, and they followed the customer’s instructions.

This has led to only around a quarter of funds lost through APP fraud being recovered by the victims. However, this is due to change.

The Payment Systems Regulator (PSR) has announced it will introduce a new industry code from September this year, which will include a reimbursement model for victims of fraud.

The new standards will set out the circumstances when banks and building societies may be responsible for refunding scam victims that have ‘acted appropriately’.

The new standards will not be retrospective however, so cases that have happened before its introduction will not be covered. It will also only cover the UK, so people duped while abroad will not be covered.

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