Consumers will find it easier to seek compensation after being scammed, following the government’s investment in a “single front door for redress”.

The federal government will provide $14.7 million to create a clearer pathway for victims under a revamped and strengthened dispute resolution scheme.

Assistant Treasurer and Minister for Financial Services Stephen Jones announced today that the Australian Financial Complaints Authority (AFCA), which currently deals with complaints made against financial institutions, will be provided with a funding boost over two years to assist it in operating a new external dispute resolution scheme for scams in the banks, telecommunication service providers, and social media sectors.

“At the moment, there's no clear obligations on either the banks, the telecommunications companies or the social media platforms,” he said.

“And all of these businesses have got a key role in that scam production chain.

“We're planning to introduce laws over the next few weeks which will make clear the obligations of banks, telecommunications companies, social media platforms and have a single front door for redress, so that consumers know where to go and there are clear rules for redress, clear rules for compensation.”

New laws coming

Under legislation to be introduced to Parliament by the end of the year, companies operating in these sectors will now be subject to AFCA’s complaints resolution mechanism, and may be found liable to compensate victims of scams on their platforms.

Scam victims will soon be able to seek compensation through this body if they have been unable to reach a satisfactory outcome through existing internal dispute resolution mechanisms, whether the complaint is against one or multiple regulated industries.

The new funding will help AFCA provide this “clear single pathway” for scam victims, Jones said.

“We want victims of scams to know the government has their backs, and we want businesses to understand that they have a responsibility to protect Australians from these often-devastating scammers,” he said.

“Our scams crackdown will cut off the avenues scammers use to target Australians by setting a high bar for what businesses must do to prevent them.

“Scam victims will have a clear pathway for redress.”

AFCA receives more than 100,000 complaints each year, and about 11,000 of these in 2023-24 were related to scams.

The federal government last month unveiled new Scams Prevention Framework legislation, which significantly expanded the remit of AFCA and introduced broad powers to apply minimum requirements on a range of companies as part of mandatory code of conduct.

The regulator will also have the power to impose fines on these companies of up to $50 million if they are found to not be doing enough to stamp out scam ads on their platforms, such as by not properly verifying advertisers.

The government’s consultation period on this draft bill has now concluded, with the feedback received being considered.

A win for scam victims

Victims of scams have had some success in seeking compensation through AFCA.

Just last month, a man who lost $47,000 in an unauthorised transaction took his bank, HSBC, to AFCA over a disagreement over the reimbursement of this money, with the victim emerging victorious.

The scam involved the man receiving a suspicious SMS and engaging in a phone exchange, leading to an unwanted transaction of more than $47,000.

HSBC had argued he was ineligible for compensation as he had breached a clause of the ePayments code, which says users must not “voluntarily disclose” passcodes to others.

AFCA eventually ruled in favour of the scam victim and ordered HSBC to compensate him.

Australia is the fifth most scammed nation in the world, according to a recent report, with losses estimated at $2.7 billion in 2023.

Smaller banking institutions have been found dealing with scams inadequately, with ASIC finding that they “frequently mishandle” cases.

The analysis of 15 financial institutions found that less than 20 per cent of scam transactions were being detected and stopped, and victims were liable for the losses more than 95 per cent of the time.