Liam Halligan: Why are the Government only just tackling APP fraud?

Covid has seen APP fraud 'surge' and the Government should have responded quicker

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Now there’s plenty of economic doom and gloom out there, so let me give you some good news...

Because big banks who fail to tackle fraud will be named and shamed under government-backed plans to ensure that victims who transfer money to scammers are fully compensated, the banking watchdog, the Payments Systems Regulator, wants banks to the reimbursing customers who have lost out – and for such repayments to be compulsory.

The economic secretary to the Treasury John Glen says the government will “legislate to address any barriers to regulatory action at the earliest opportunity".

Banks and building societies will also have to publish data on fraud prevention and reimbursements rates – and they could face fines if they don’t treat victims fairly.

So-called Authorised Push Payment or APP fraud – when victims are tricked into transferring money to a fraudster Bank fraud – has grown steadily over recent years.

Back in 2017, such fraud amounted to just over 200 million pounds a year, according to the industry trade body UK Finance, with banks reimbursing just a fraction of that.

As APP fraud has grown over recent years, to almost 500 million pounds in 2020, compensation payments from banks have risen, but are still well below half what victims have lost.

During this Covid crisis, APP fraud has surged once again, up 71 per cent during the first half of this year, with criminals stealing the equivalent of £4 million pounds a day.

Until now, bank customers have faced a lottery when it comes to refunds, with different banks interpreting the rules in different ways. During one three-month period last year, one unnamed bank issued refunds in just 1 per cent of fraud cases.

The Financial Ombudsman, which settles disputes between banks and customers has ruled in favour of three-quarters of victims refused bank refunds – suggesting banks have been systematically avoiding make pay-outs to fully deserving customers.

But now, in what the Consumer group Which? is hailing as a “huge win” for consumers, the bank fraud compensation scheme will change from the existing voluntary code, introduced in 2019, to a mandatory system underpinned by law.

Good news, but why this is only happening now?