RACHEL RICKARD STRAUS: Banks must reimburse online fraud victims

We needed a bit of good news last week, in the midst of the gloom. Fortunately, it showed up, in the form of a memorable but barely noticed report published Thursday.

All fraud victims who have been tricked into sending their money through online scams will be refunded within 48 hours, the Payment Systems Regulator (PSR) suggests.

The regulator predicts that with its new rules, more than 95 percent of victims of bank transfers will be compensated, compared to the current 49 percent.

Banks will have to reimburse victims unless they suspect they were involved in the crime or gross negligence. All losses between £100 and £1 million will be refunded. Banks can charge victims a fee for this, but no more than £35.

The cost of reimbursement is split between the victim’s bank and the bank to which the money was fraudulently sent. Hooking up recipient banks should encourage them to do more to prevent fraudsters from opening accounts in the first place.

These new rules cannot be introduced soon enough. They are in consultation, but will probably not enter into force until next year. Fraud is already the biggest contributor to crime in the UK and this type of scam is increasing rapidly. Victims lost £583 million last year – a 39 percent increase in one year alone.

This is one of the most terrifying and life-changing scams, where victims can lose their savings in an instant. It is also deeply harmful. In many cases, fraudsters spend days or even weeks befriending and gaining their victim’s trust.

They can tell them they’re from the police, their bank’s fraud department, or even a potential love interest. They make up stories to convince their victim to give up their money. The emotional impact of that kind of betrayal can be devastating.

I have spoken to countless victims who have been abandoned by their bank and told that their debt is or their money is gone and nothing can be done about it. Now, finally, banks will have to accept – as we argued in our Nail the Scammers campaign – that these scams are sophisticated, involve social engineering and that victims cannot be blamed.

The PSR will also require banks to share information with each other to detect and stop scammers, and to publish data on which banks are refunding their customers – and which are lagging behind.

I suspect that the new rules will encourage banks to make reporting fraud easier as well. Letting them out of their pockets when a scammer wins should motivate banks to pick up the phone instead of leaving terrified victims on hold. The proposals are good news. But I feel for the scam victims who have already lost their savings and will not benefit from it. They may feel justified – the new rules prove they were never to blame. But that’s little consolation when you’re robbed.

I asked the PSR about existing victims, but they said they can’t apply the rules retroactively. Still, I think it’s worth it for victims to go back to their bank armed with knowledge of these new rules – and to the Ombudsman if their bank still refuses to help.

Many more people will be victims before the new rules come into effect – they also need to be protected.