The Failure of Banks in Protecting Scam Victims

Introduction

In today's digital age, scammers are becoming increasingly sophisticated, preying on unsuspecting individuals and causing significant financial harm. Unfortunately, many victims find themselves not only dealing with the aftermath of these scams but also facing a lack of support from their banks. This article examines the alarming trend of banks failing to protect scam victims and the devastating consequences it can have on individuals and their families.

The Distressing Experience of Angela Fitzwater

Angela Fitzwater, an 83-year-old woman, experienced firsthand the devastating impact of bank scams. She fell victim to not one, but two separate scams, resulting in a loss of $26,000. What made matters worse was the response she received from her bank, Bendigo Bank. Angela expressed her frustration, stating that the bank "just doesn't give a damn" and failed to provide the support she desperately needed.

The first scam began with a WhatsApp message impersonating Angela's son, Alex. The scammer claimed to have smashed his phone and asked Angela for a temporary loan of $3,000. Believing it was her son in need, Angela transferred $10,000 before realising she had fallen prey to a scam. She immediately contacted Bendigo Bank, but their response fell short of her expectations.

Negligence and Lack of Empathy

Upon reporting the scam to Bendigo Bank, Angela faced a months-long ordeal of unanswered calls and emails. Bendigo Bank's customer service representatives were unable to reach their own fraud department and failed to provide the assistance Angela needed. As her distress compounded, Angela's son, Alex, witnessed her slip into a state of depression. The lack of empathy and response from the bank only added to their frustration and disappointment.

Bendigo Bank's Troubling Response

After three months of waiting, Angela finally received an email from Bendigo Bank. The bank claimed to have investigated the scam but was unable to recover the funds. In their response, Bendigo Bank shifted the blame onto Angela, stating that she had authorised and completed the payments herself. This response was deemed "really concerning" by Steph Tonkin, CEO of the Consumer Action Law Centre, who highlighted the need for urgent reform in the banking sector's approach to scams.

The Urgent Need for Banking Sector Reform

Angela Fitzwater's case is not an isolated incident. A report by the Australian Securities and Investments Commission (ASIC) revealed that in the 2021-22 financial year, approximately 31,100 customers collectively lost over $558 million to scams at the four major banks (ANZ, Commonwealth Bank, NAB, and Westpac). This alarming statistic highlights the urgent need for reform in how banks handle scams and protect their customers.

Government Intervention and Legislation

Federal Assistant Treasurer Stephen Jones acknowledged the need for higher standards and clearer compensation guidelines when things go wrong. The government plans to introduce a code of practice for banks that includes measures to protect customers from scams and outlines compensation requirements. This legislation, expected to be presented to parliament early next year, aims to hold banks accountable for their role in protecting customers from scams and ensuring appropriate reimbursement.

Steph Tonkin of the Consumer Action Law Centre emphasised the importance of reimbursement as an incentive for banks to detect and prevent scams. She referred to the UK government's recent laws that force banks to reimburse scam victims, even when they are not at fault. Australia should follow suit and prioritize the protection and support of scam victims.

Bendigo Bank's Cyber Security Measures

Bendigo Bank, in response to the increasing threat of scams, stated that it takes cyber security seriously and uses standard industry practices to protect its customers. The bank believes that by working together with customers, the incidence of scams and fraud can be further reduced. However, Angela Fitzwater's case raises doubts about the effectiveness of these measures and the bank's commitment to customer protection.

The Second Scam and Conflicting Advice

Tragically, Angela Fitzwater fell victim to a second scam a few months later. This time, scammers impersonating Bendigo Bank's fraud department convinced her to share her security details. They swiftly transferred $40,000 from her savings account and made smaller transactions to purchase $16,000 worth of cryptocurrency. It wasn't until Angela's card was declined at a shop that she discovered the fraudulent activity.

Once again, Angela and her son, Alex, received conflicting advice from Bendigo Bank. They were instructed to take Angela's phone to a computer shop to be wiped before the bank would reopen her online banking access. Alex found this advice puzzling, as his mother had willingly shared her security code, meaning her phone's security had not been compromised.

Reimbursement and Crypto Payment Restrictions

Bendigo Bank has partially reimbursed Angela Fitzwater for the stolen $16,000. However, she is still awaiting a decision on the remaining amount spent on cryptocurrency. In an effort to combat financial crime, Bendigo Bank recently announced its decision to block "high-risk" crypto payments, aligning itself with other Australian banks.

The Way Forward: Prevention, Protection, and Reimbursement

The failure of banks to protect scam victims is an issue that requires immediate attention. The government's proposed code of practice for banks, expected to be introduced soon, should prioritise prevention, protection, and reimbursement. Reimbursement not only helps the victims but also serves as an incentive for banks to improve their detection and prevention measures.

As banks continue to play a pivotal role in our financial lives, it is their responsibility to safeguard customers from the evolving threats posed by scammers. By taking proactive steps, implementing robust security measures, and providing empathetic and timely support to scam victims, banks can restore trust and confidence in their ability to protect their customers' financial well-being.

Conclusion

The distressing experiences of Angela Fitzwater and countless other scam victims highlight the urgent need for reform in how banks handle scams. The failure to provide adequate protection and support not only exacerbates the financial losses but also causes emotional distress and hardship for victims and their families. The government's proposed legislation, along with increased accountability and reimbursement measures, will be crucial in ensuring that banks fulfil their duty to protect customers and prevent scams. It is time for banks to prioritise the prevention of scams, the protection of customers, and the reimbursement of victims to restore trust in the banking sector.