Lib Dems table amendment to close ‘victim-blaming” fraud loophole

EMBARGO: Immediate Release

MPs will today (Wednesday 7 December) debate a Liberal Democrat amendment to close a loophole that would allow banks to refuse to reimburse scam victims.

The Government’s proposals in the Financial Services Bill would let banks continue to deny victims their money back, by claiming that they should have known it was a scam. The Liberal Democrats said that this "victim-blaming is unacceptable" and that the legislation should be strengthened to prevent banks dodging their responsibility.

According to figures from UK Finance, less than half of the money taken through bank transfer scams is reimbursed to the victims: just £271m of £583m in 2021.

The Financial Services Bill would require the Payment Systems Regulator to set rules on reimbursement for this type of scam, but leaves it up to the regulator to decide the extent of those rules. The Liberal Democrat amendment would ensure that banks cannot refuse to reimburse victims on the grounds that they “ought to have known” it was a scam.

Liberal Democrat Treasury Spokesperson Sarah Olney MP said:

“Fraud is an appalling crime that affects millions of people each year, causing enormous financial hardship and distress.

“But this Conservative government simply isn’t taking fraud seriously enough, with far too many criminals getting away with while victims are left out of pocket.

“Far too often, banks refuse to reimburse customers by claiming it was their own fault. This kind of victim-blaming is unacceptable, and a way for banks to dodge their responsibility.

“The Liberal Democrats are demanding that the government close this loophole to ensure victims of scams get the compensation they deserve.”

ENDS

Notes to Editor

Liberal Democrat Treasury Spokesperson Sarah Olney has tabled the following amendment at Report Stage of the Financial Services and Markets Bill:

Amendment 7

Clause 64, page 78, line 20, at end insert—

“(5A) The relevant requirement referred to in subsection (5) must specify that reimbursement in qualifying cases cannot be refused on the basis that a victim, or victims, ought to have known that the payment order was executed subsequent to fraud or dishonesty.”

£583 million was lost to Authorised Push Payment (APP) scams (also known as bank transfer scams) last year, up 39% from £421 million in 2020. Less than half the amount taken through these scams was reimbursed to the victims: just £271m of that £583m (47%). [UK Finance]

That’s despite the banking industry having adopted a voluntary code for dealing with APP scams in May 2019 (the Contingent Reimbursement Model Code for Authorised Push Payment Scams), including the principle that banks should reimburse victims unless they are at fault.

The Government has included a clause (Clause 64) in its Financial Services and Markets Bill that would require the Payment Systems Regulator to “impose a relevant requirement, in whatever way and to whatever extent it considers appropriate, for reimbursement to be made” in qualifying APP scams.