Major banks forced to reimburse Aussie scam victims after $2.7 billion loss

Australian banks could be forced to compensate customers who are tricked into transferring money to scammers. It comes after Aussies lost more than $2.7 billion to scammers last year with only a small portion of this refunded to customers.

Assistant Treasurer Stephen Jones has announced plans to establish codes of conduct for banks, telcos and social media platforms. The codes would put "tough obligations" on companies and make them liable for compensation and subject to penalties if they don't do enough to detect and disrupt scams.

"If there is a breach of the code, the bank, telco or digital platform will be held to account," Jones told the National Press Club. "If they drop the ball and a victim loses money, they will be liable to compensate the victim."

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Jones said the law does too little to help victims get their money back. Victims are often duped into handing over their money and, as a result, banks are generally not obligated to reimburse them.

“A fundamental characteristic of scams is that they are transactions that are authorised – through deception – by the victim, so the law is not fit-for-purpose,” he said.

“We will address this to ensure victims can receive compensation in the right circumstances. Compensation for inaction, for negligence, for failing to meet an obligation is a critical part of our framework.”

Have you fallen victim to a scam? Contact tamika.seeto@yahooinc.com

Under the current ePayments code, customers may be held liable for losses arising from an unauthorised transaction if their bank can prove they contributed to the loss. This could be the case if they voluntarily disclose their PIN or password to another person.

Jones said social media companies were “dragging their heels” in the fight against scams. While scam losses have been falling, scam losses due to social media were up 17 per cent last year.

“It is offensive that digital platforms let scammers use their network to target victims,” he said. “And worse that they accept the revenue that comes from these criminals placing scam ads on their platforms.

Scam victim welcomes the move

Scam victim Sunni Wan lost nearly $50,000 to a fraudster who impersonated her bank HSBC and tricked her into handing over her personal details and one-time banking codes.

The Sydney resident has welcomed today’s announcement and believes Australia should be following the lead of other countries.

“Australia should follow the UK's mandatory reimbursement legislation so that it gives banks incentives to care and protect its customers,” Wan told Yahoo Finance.

“I believe New Zealand will also be implementing this legislation, why hasn't Australia?”

From October, it will be compulsory for UK banks to reimburse scam victims who have been tricked into sending money to scammers. Exceptions will apply for cases of gross negligence or where consumers were found to be acting fraudulently.

New Zealand and Singapore are looking to introduce similar laws.

Banks respond

The Australian Banking Association (ABA) said winning the war against scammers required "collective effort" across the economy.

"Our industry strongly supports a framework that clearly sets out obligations for banks, telcos and social media platforms," ABA CEO Anna Bligh said in a statement to Yahoo Finance.

"It must also provide clarity and certainty about proportionate liability across the entire scams chain, where obligations have not been met."

Bligh said focusing liability just on banks risked "undermining the success of an entire scams chain approach".

"Scam losses are reducing at a much faster rate in Australia than in the UK. There is a good reason why no other country in the world has adopted a UK-style reimbursement model," she said.

According to government data, the UK had a 5 per cent drop in scam losses in 2023. This was smaller than Australia for the same period.

Victims ‘wearing the loss’

Aussies lost $2.74 billion to scams in 2023, down 13.1 per cent on the previous year. The vast majority of losses are worn by victims with the Australia Securities and Investments Commission finding only 2 to 5 per cent of losses were reimbursed by the banks.

The Consumer Action Law Centre has long been calling for mandatory reimbursement for scam victims in Australia.

“Right now, consumers are wearing the loss and we are seeing this victim-blaming mentality,” policy officer Rose Bruce-Smith told Yahoo Finance.

“It’s ignoring the reality of how clever and well-resourced these scammers are. Our view is that if reimbursement was mandatory, the banks and institutions would be really incentivised to put the resources into protecting consumers' money.”

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