By John Collett
Consumer groups are calling on the federal government to force banks to compensate those customers who are scammed through no fault of their own, as is being introduced in Britain.
The call comes as losses to scams mount. In 2022, reported losse in Australia reached a record of more than $3 billion – an increase of almost 80 per cent on 2021, according to the Australian Competition and Consumer Commission.
Could banks be doing even more to prevent scams from happening in the first place?Credit: iStock
A push for compensation from Choice, the Consumer Action Law Centre and the Australian Communications Consumer Action Network came as part of a joint submission to a consultation paper on the federal government’s proposed scam code framework.
Under the initial phase of the framework, banks, telcos and social media platforms would have to comply with measures designed to better ensure they prevent, detect, disrupt and respond to scams, as well as improve reporting and information sharing arrangements, as well as dispute resolution.
Financial penalties will apply to those that fail to comply with their obligations, but the government has stopped short of requiring banks to reimburse customers for scam losses where customers are at no fault.
Consumer Action Law Centre chief executive officer Stephanie Tonkin said they were calling for measures that “have teeth” – encouraging banks to do more to stop scams in the first place by “putting bank reimbursement front and centre of any new regulations”.
“The only workable framework that will effectively disrupt scams and protect consumers would be a presumption of reimbursement of scam losses,” the consumer groups say in their submission.
As the facilitators of payments, the banks are key, as bank transfers remain one of the most commonly reported payment methods to scammers.
In Britain, banks will be responsible from October for reimbursing losses, unless consumers have been grossly negligent or are acting fraudulently. Tonkin says banks in Britain that have adopted the change before it is mandated are reimbursing the majority of scam losses.
A report released last year by the Australian Securities and Investments Commission estimated that the major banks’ level of reimbursement and compensation ranged between 2 and 5 per cent. The banks collectively stopped 13 per cent of scam payments.
A spokesperson for the Australian Banking Association said there were good reasons that no other country in the world had adopted the UK’s reimbursement model.
“[It has] made the UK a honeypot for sophisticated international criminal gangs to prey on unsuspecting people,” the ABA spokesperson said.
“The focus in Australia is building an ecosystem with government, law enforcement, telecommunication companies, banks and social media platforms working together to stop scams being served up to Australians in the first place.”
Tonkin disputes that assertion and said that, in fact, Australia is a honeypot. She said the banks need to stop worrying about reimbursement and “get their act together on stopping scams reaching customers”.
Late last year, Australian banks agreed to introduce “confirmation of payee”, whereby customers are warned if the name and bank details of the recipient do not match. All banks will be doing by the end of 2025.
Banks are also becoming much more careful about facilitating payments in cryptocurrencies, including stopping payments to particular crypto exchanges.
The National Anti‑Scam Centre, created last year by the Albanese government, is having some success in combating scams, with a fall in losses reported to the Australian Competition and Consumer Commission.
Expert tips on how to save, invest and make the most of your money delivered to your inbox every Sunday. Sign up for our Real Money newsletter.