UK move putting Australia to shame

A billion dollar problem is seeing Australians preyed on and the lack of action is startling.

In the UK, new laws commenced on Monday that require banks to repay their customers’ scams losses, except in limited circumstances.

Over there, laws to protect consumers from scams are not a controversial topic, having received bipartisan political support.

In fact, the British banking sector has had a voluntary reimbursement system for years, paying back an average of 67 per cent of customers who have lost money to scams.

As a result, losses to scams have gone down in the UK, and are at a fraction of what Australians are losing.

Right now, Australia is a honeypot – the target of scammers domestically and internationally — with more than $2.74 billion lost last year. That is far more compared to other countries such as the UK, no matter how you measure the losses.

Our scam response has been left to industry to lead, and it is bank customers, not businesses, who are paying for 96 per cent of scams losses, according to the Australian Securities and Investments Commission.

The absence of regulation and industry inaction has left Australians exposed as scammers become far more sophisticated, adopting Artificial Intelligence, stealing biometric information and preying on lax security systems in a fast-evolving digital financial system.

CEO of the Consumer Action Law Centre Stephanie Tonkin is calling for the government to implement a better system for scam victims to get their money back. Picture: Supplied

When the Australian government finally announced its consultation for the Scams Prevention Framework (SPF) last month, I welcomed it – with caveats – because the SPF has real potential to lead the rest of the world on scams protection.

But this requires the Australian government to walk in the shoes of victims seeking redress and rethinking its opposition to a simple reimbursement model.

For the last weeks, I and my colleagues have been poring over the details of the framework. When you reach the part that concerns victims, you see the framework burdens consumers with navigating an impossible dispute resolution system.

Using the framework, we have plotted the “journey” a typical bank customer would have to take to get redress from the banks, telco and digital platforms involved.

It’s an almost 30-step process that takes between 18 months and two years – with no guarantee of getting any money back at the end.

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Australians lost more than $2.74 billion lost last year to scams. Picture: iStock

The problem is, the SPF sets up a case-by-case system in which a victim must bring their case against multiple businesses – most of them resourced multinationals like the big four banks and Meta – to get their money back.

The framework also creates an information imbalance between consumer and industry, requiring the victim to prove their right to redress without access to the evidence they need. How will a consumer prove that Meta held “scams intelligence” at the time of the scam, or that its algorithms didn’t amount to “reasonable steps to act on scams intelligence” as required by the framework?

Even with extra funds, it is implausible that the proposed external dispute resolution body, the Australian Financial Complaints Authority (AFCA), would be able to work through the massive influx of multi-party scams complaints in a timely fashion.

In short, the framework is stacked against the victim, and those who don’t give up will be bogged down in AFCA for years and years.

The current proposed legislation would involve almost 30 steps for scam victims to try and get their money back, said Stephanie Tonkin. Picture: Kylie Else

I am also concerned about the very long wait for the SPF obligations to come into force — at least until 2027. Billions will be lost to scams in the meantime without recourse.

So, what’s the answer? Under a uniquely Australian model — that would sit within the SPF — there could be just four steps for a victim to access justice in weeks.

Being on the hook for reimbursement is the best incentive for business to lift its prevention game and keep up with ever-innovating scammers, rather than the SPF minimum compliance approach.

Businesses should be on the hook for scam reimbursement. Picture: iStock

Simple reimbursement will also cost a lot less in complaints handling and legal fees, and after the victim is repaid, banks can recoup the funds anyway through industry-agreed apportionment.

Consider the savings, not just in terms of money, but in mental stress, days off work, people’s lives being ruined and shame.

Australia’s banks have said it’s not fair that they have to shoulder the burden of scams, but they won’t have to with industry-agreed apportionment, and as the “reimbursement bill” reduces through prevention measures coming online.

Banks have also said that reimbursement will mean their own customers could be more careless with their money.

Assistant Treasurer and Minister for Financial Services Stephen Jones. Picture: Supplied

I speak to dozens of victims that the Consumer Action Law Centre helps, and I know nothing could be further from the truth. There is no basis for banks not to trust their own customers to take care with their life savings.

In any event, gross negligence would limit access to reimbursement.

I believe the Assistant-Treasurer Stephen Jones when he says he wants to create the strongest framework to protect Australians from financial crimes like scams.

Government has an opportunity with this legislation to springboard Australia from the bottom to the top of the pile, to “leapfrog” other jurisdictions with a simple consumer-centric model that benefits everyone. Why wouldn’t we take it?

Stephanie Tonkin is the CEO of the Consumer Action Law Centre

Originally published as UK move putting Australia to shame