An alliance of Australia’s peak consumer advocate groups say customer reimbursement must be at the centre of the federal government’s proposed new scam laws.

Submissions have now closed for public consultation on mandatory industry codes covering scams, estimated to be costing Australians more than $3 billion a year.

A coalition of consumer groups, including the Consumer Action Law Centre, CHOICE, and the Australian Communications Consumer Action Network, is urging the government to require industry to bear more of the cost of scamming.

In a joint submission in response to Treasury's Scams – Mandatory Industry Codes consultation paper, the consumer groups are calling for mandatory reimbursement of consumer losses.

Calls for industry to step up

Consumer Action Law Centre CEO Stephanie Tonkin said industry liability must be at the heart of the regulatory framework covering scams.

“It’s the only workable approach to effectively disrupt scams and protect consumers from their loss,” Ms Tonkin said.

She said if money lost to scams came straight out of the bottom line of industries who are gatekeepers of people’s money and personal information, they would be “incentivised” to act.

This was the best way to significantly increase industry’s investment in systems and new technologies to keep customers safe and secure, she said.

“This is the only realistic way to achieve the level of investment needed to disrupt scams in Australia,” Ms Tonkin said.

Low scam reimbursement and detection rates

An Australian Securities and Investment Commission (ASIC) report last year found Australian bank customers are overwhelmingly bearing the cost of scams, accounting for 96% of scam losses across the banks.

ASIC found banks detected and stopped a low proportion of scam payments made by their customers, around 13%.

Reimbursement rates varied between banks but was low across individual banks, ranging from 2 to 5% of claims.

ASIC’s report found Australian banks had inconsistent and narrow approaches to determining liability and, overall, their approach was “less mature than expected”.

Currently, telecommunications providers are the only sector with specific spam regulations.

The consultation paper said although the number of scam calls decreased 56% from 2021 to 2022, the 2022 calls resulted in the highest reported losses, up more than 40% to $141 million.

This demonstrated scams are becoming more sophisticated and "opportunities remain for the sector to enhance disruption", the paper said.

What scam laws are consumer groups proposing?

As well as mandatory reimbursement of scam victims, the consumer group is calling for a “fair, simple, fast and effective” dispute resolution pathway through customers’ banks, with a decision required to be made within five days.

In the event of a dispute failing to be resolved, there needed to be a single door for scam victims to access external dispute resolution covering all code-regulated bodies.

It also proposes consumers should be reimbursed up front before institutions, including banks, digital platforms, and telecommunications providers, pursue each other’s failures and inactions via a separate mechanism.

Government proposals need to go further

Ms Tonkin is calling on the government to go much harder than its current proposals.

“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,” she said.

While Ms Tonkin said the core principles are a step in the right direction, they do not meet community expectations of “tough new industry codes” or a “high bar for liability” the government has been promising for the past year and a half.

“The upcoming mandatory laws and codes should be modelled around improving consumer outcomes and preventing harm, rather than solely relying on businesses to comply with minimum obligations,” she said.

“(This approach) will continue to result in victim blaming and shifting obligations and costs onto consumers who are near powerless to detect or prevent sophisticated scams from occurring.”

The UK model

Consumer groups are pushing for the Australian government to adopt a victim compensation model similar to the one to take effect in the UK in October this year.

Under the country’s new regulations, the costs of customer reimbursement is to be split 50:50 between the institution sending the consumer’s funds and the one receiving them.

Most scam victims are to be reimbursed with five business days with additional protections offered for vulnerable people.

The Australian government is now considering public submissions. In its consultation paper, it said the reforms outlined were merely a guide as to how industry reforms might operate.  

Speaking to the Savings Tip Jar podcast in 2023, Australian Banking Association chief executive Anna Bligh said this approach would open a can of worms.

"Some of this is about taking personal responsibility for how careful we are with protecting our passwords, thinking twice about the kinds of payments that we're making, and being really careful about whether or not it's a legitimate organisation that we're paying," Ms Bligh told the Savings Tip Jar podcast.

"The money that banks have is your money.

"If we had a system where banks used your money to reimburse every customer that had authorised a scam payment, I think we'd end up with some real problems in the system."

Image by Chris Yang on Unsplash

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