The lack of mandatory compensation for victims of scams in the federal government’s flagship reforms has been lashed by consumer groups and members of the crossbench.
A government-led Senate committee report on the Scams Prevention Framework Bill 2024 earlier this week backed the legislation to pass without any amendments.
Both Labor and Coalition members of the committee said they did not think that banks, telcos and social media firms should be forced to provide redress to their customers who are victims of scams.
This was despite the committee hearing from a number of consumer and legal groups who argued that a “big stick” approach was needed to ensure these large companies are doing everything necessary to stamp out scams on their platforms, and that the planned approach to seeking compensation would be akin to a “David and Goliath” battle for everyday Australians.
The world’s honeypot
The report found Australia is the “world’s honeypot for scammers”, with at least $2.74 billion lost to scams in 2023 alone, and that the existing scam protections are “piecemeal and inconsistent across the economy”.
The government’s reforms are based around the introduction of the Scams Prevention Framework to prevent and respond to scams, with designated sectors to be subject to requirements to implement measures that prevent, combat and respond to scams.
Much of the specifics of this framework will be decided following the passage of the legislation in accompanying regulations.
The scheme includes internal and external dispute resolution frameworks and options for external legal action but does not require any of the companies to provide redress to victims of scams, in contrast to the approach of the United Kingdom.
Consumers are the big losers when it comes to the Scams Prevention Framework, say consumer groups. Photo: Shutterstock
“The Scams Prevention Framework will not require sectors to mandatorily compensate victims of scams but will include redress mechanisms for consumers where a regulated entity has contravened the requirements of [it] to prevent and address scam activity,” the report said.
In additional comments to the report, the participating Coalition Senators supported the government’s decision to not require mandatory redress for scam victims.
“While consumers should have simple and efficient access to redress, the Coalition agrees a mandatory or automatic reimbursement model is not the right approach,” the Opposition senators said.
Consumer groups left disappointed
In the UK, banks are required to reimburse most victims of scams within five days of receiving a claim, with a cap of $167,000.
Consumer groups had pushed the government to include a version of this model in its scams crackdown, but ultimately opted against this.
Without such a mechanism, the bill will instead “introduce a burdensome regime that fails to ensure fair outcomes for scam victims”, consumer groups said in a joint submission.
Consumer Action Law Centre CEO Stephanie Tonkin said she hopes further changes are made to the legislation in the Senate.
“There’s still a way to go,” Tonkin told Information Age.
“The Scams Prevention Framework must be more consumer-focused and out of the pockets of the banks and industry.
“In the middle of a cost-of-living crisis, we are hopeful the Senate will swing the pendulum back towards consumers.”
Consumer Action Law Centre CEO Stephanie Tonkin. Photo: Supplied
Greens Senator Nick McKim, who was on the committee, said Australia is “lagging behind the rest of the world” in terms of responding to scams, and that the federal government has sided with the big banks over everyday Australians.
“Labor’s Scam Prevention Framework Bill could have been a much-needed opportunity to crack down on the harm caused by scams,” McKim said.
“Instead of listening to consumer organisations, Labor has caved to the big banks by designing a bill that protects the banks from having to take responsibility for scams rather than provide a solution that would incentivise banks and other corporations to prevent scams from occurring and support people who have been scammed to quickly get their money back.”
Convoluted scheme
Under the planned scheme, the Consumer Action Law Centre said that an average person who has fallen victim to a scam would have to go through a 30-step process taking up to two years in an attempt to get their money back.
David Niven, a consumer lawyer with 44 years of experience and who recently ran cases at the Australian Financial Complaints Authority (AFCA) for HSBC scam victims, said that consumers will have to prove their case against a bank to get a refund, and this may require them to go all the way to the Federal Court.
“It will be a rare victim who has the funds to defend their case in the Federal Court,” Niven said in a submission to the committee.
“[The bill] does not provide meaningful protection for consumers and it is likely to significantly reduce consumers’ ability to obtain refunds compared to the current position.”
Since the framework was announced, the big banks and tech firms have each argued the other should be held more liable when an individual gets scammed, with the proposed Australian scheme allowing for liability to be shared.
“It’s deeply disappointing that this bill has led to industry finger-pointing and seeking to limit liability when it’s supposed to be about a collaborative approach to protecting Australian consumers,” Tonkin said.
Scam losses drop
Figures released by the federal government last week revealed a 33 per cent drop in the amount lost to scams last year.
Assistant Treasurer Stephen Jones welcomed the data but said more needs to be done, urging Parliament to support the passage of the Scams Framework through Parliament.
“Losses are going down and that’s a good sign, but Australians are still losing far too much," Jones said.
"We want to make Australia the toughest target for scammers and our laws will put Australia at the head of the pack.
“The Parliament should support these laws so that Australians have the best protections to keep their money safe.”
