Australian consumer groups pushing hard as government develops scam regulatory framework

By John Kavanagh*

Australian consumer groups and community legal centres are pushing for liability for reimbursement to be included in the scam regulatory framework currently being developed by the government.
 
They also want rules requiring banks to be more proactive in telling victims about recovery processes, and an obligation to report all confirmed scams.
 
In November, Australia's Treasury released a consultation paper on mandatory industry scam codes, pointing out there is currently “no overarching regulatory framework that sets clear roles and responsibilities for the government, regulators and the private sector in addressing scams”.
 
The paper said: “While many businesses have been responding to the increasing threat of scams to Australian consumers, the government remains concerned that these efforts are often siloed within particular businesses or sectors, or that take-up of broader measures has been irregular across each sector.”
 
Code provisions would cover prevention, detection and disruption, response and reporting. Businesses would be required to develop, maintain and implement an anti-scam strategy.
 
Sectors that may be covered include banking, superannuation, digital currency exchanges and online marketplaces. Currently, telecommunications is the only industry operating under an enforceable (but not mandatory) scam code, the Reducing Scam Calls and Scam Short Messages Code.
 
When it comes to banks, areas of focus include improving their capacity to recover payments made to scammers, developing more safety measures where high risk customers or transaction activity is involved, and faster response times.
 
Banks would have to assist a consumer to trace and recover transferred funds to the extent that funds are recoverable. Receiving banks would be required to reverse transfers upon request from a sending bank.
 
Other bank-specific obligations would include a requirement to identify customers at higher risk of being targeted by scammers and to verify a transaction is legitimate where a consumer undertakes activity that is identified as having a higher risk than their normal activity.
 
Banks would have to ensure customers could act quickly when they suspect a transaction is likely to be a scam, such as deploy an in-app “scam switch”.
 
The paper acknowledged recent scam prevention measures taken by the banking sector, including the announcement last week of the formation of the Scam-Safe Accord, which will invest A$100 million over the next couple of years in the development of a confirmation of payee system.
 
But it said more needs to be done, citing an Australian Securities and Investments Commission report from earlier in the year describing the approach to scams in Australia’s major banks as “variable and less mature than expected, with gaps and inconsistencies in scam detection, response and victim support”.
 
A submission to Treasury from a number of consumer groups, community legal centres and financial counselling bodies said the code should go further, including liability for reimbursement.
 
The submission said: “The only workable framework that will effectively disrupt scams and protect consumers would be a presumption of reimbursement of scam losses, with industry bearing the onus of proof otherwise. 
 
“If the money lost to scams were to come straight out of the bottom line of the industries that are the gatekeepers of people’s money, personal and online information, industry will be incentivised to significantly increase its investment in measures and new technologies to keep their customers safe and secure.”
 
It said community expectations are for tough codes in this area. And it wants “the presumption of reimbursement” to be higher for vulnerable customers.
 
It said the code framework outlined in the Treasury paper fails to set out clear, enforceable rights or provide a process for consumers to asset their rights.
 
The group, which includes CHOICE, the Consumer Action Law Centre, Financial Counselling Australia, Super Consumers Australia and the Consumer Policy Research Centre, also wants the ePayments Code to be mandatory.
 
The submission said another noticeable gap in banks’ current obligations is in relation to their housing of scammers’ receiving accounts. The group wants tighter requirements for fund recalls.

 *John Kavanagh is associate editor of BankingDay. This article was first published by BankingDay and appears here with permission.