We seem to be living in a world where no communication by text, phone, email or social media – or interaction with an ad on Facebook or Google – can really be trusted.
Australians lost a record $3.1 billion to scams in 2022, an 80% increase over the previous year.
The final tally for 2023 may well be worse.
It's fair to say that scammers have gained the upper hand in Australia and that the banking and other industries' attempts to stop them have been feeble at best.
In January CHOICE published the story of a retired couple who lost over $2.5 million to an investment scam that involved the unwitting cooperation of seven banks, none of which have agreed to reimburse a cent.
One glaring omission is the requirement for banks to reimburse scam victims
The banks either sent funds to accounts controlled by scammers or transferred funds out of those accounts. The couple's money is now gone for good, as has been the case with the many other scam victims we've heard from.
The industry has committed to rolling out new anti-scam protections over the next couple of years, including a long-awaited confirmation-of-payee system.
This will allow customers to double check that the recipient of their money transfer is who they think they are.
It's a start, but one glaring omission from the promised improvements is the requirement for banks to reimburse scam victims as a fundamental principle.
In the UK and other jurisdictions, reimbursement has become mandatory in many cases. In Australia, somewhere around 96% of scam losses are borne by the victims.
CHOICE weighs in on anti-scam consultation
Against this backdrop, CHOICE has lodged a joint submission along with the Consumer Action Law Centre (Consumer Action) and the Australian Communications Consumer Action Network in response to the federal government's consultation paper proposing mandatory anti-scam standards for banks and other industries.
A range of consumer advocacy groups have endorsed the submission.
It calls for stronger consumer protections than those that are outlined in the government's paper, which would merely require businesses to comply with certain scam prevention obligations that are unlikely to turn the tide.
Industry liability for reimbursement for customers must be at the heart of the scams regulatory frameworkConsumer Action CEO Stephanie Tonkin
In the view of CHOICE and our consumer advocacy allies, businesses must feel the pain of scam losses in order to have an incentive to prevent them. As it stands, the losses are overwhelmingly borne by everyday Australians.
The liability for scam losses should lie not with the victims, but with the financial institutions that helped facilitate the fraudulent transactions.
"Industry liability for reimbursement for customers must be at the heart of the scams regulatory framework," says Consumer Action CEO Stepanie Tonkin. "It's the only workable approach to effectively disrupt scams and protect consumers from their loss."
What CHOICE wants
Our submission includes a number of recommendations, including:
- A broad and all-encompassing definition of what constitutes a scam.
- Mandatory reimbursement of scam victims by their banks.
- A fair and effective bank dispute resolution process with a five-day turnaround.
- Making the ePayments Code mandatory.
Digital platforms also rife with scams
Banking isn't the only sector that needs to get serious about stopping scams – digital platforms such as Meta and Google have also become major scam-enablers.
"These tech giants are exposing people to scams through unverified fraudulent advertisers, and failing to provide appropriate support for victims," says CHOICE director of campaigns and communications, Rosie Thomas.
"We welcome the government's proposed obligations on digital platforms in relation to scams, but the rules need to be more strongly written, enforced by the Australian Competition and Consumer Commission and backed by strong penalties to be effective."
These tech giants are exposing people to scams through unverified fraudulent advertisers, and failing to provide appropriate support for victimsCHOICE director of campaigns and communications Rosie Thomas
The government's proposals also fail to impose obligations on online marketplaces.
"This will create confusion for consumers about where their protections start and end, as well as leaving potential loopholes for scammers to exploit," Thomas says.
Protecting the most vulnerable consumers
Australians 65 and older have lost more money to scams than any other age group.
But they're not the only group who are disproportionately vulnerable to scams, which is why we're calling for the government to strengthen its anti-scam proposals to include special protections for culturally and linguistically diverse people as well as those with a disability.
The UK's reimbursement model already includes measures that require banks to do more for vulnerable victims.
The dispute resolution process proposed in the government's paper would involve navigating a labyrinth of internal and external dispute resolution schemes, starting with those of the banks themselves.
For many people, such a process would be unworkable.
"Consumers need a simplified, single pathway to seek redress after businesses fail to protect them from scams and that complaint pathway should be through the customer's bank or financial institution where the funds were initially kept or lost," Tonkin says.
"The regulatory framework proposed in the paper is far too complex and will be virtually impossible for consumers to navigate on their own and for industry to deliver on."
Stock images: Getty, unless otherwise stated.