Australian victims of scams who lose up to $3,000 could be automatically reimbursed under a proposed federal government dispute resolution scheme, although both consumer groups and the industries expected to fund the repayments have criticised the plan.

The proposal forms part of the federal government's implementation of the Scams Prevention Framework, legislation passed by Parliament in February last year that requires designated sectors to prevent, detect, disrupt, respond to and report scams and attempted scams.

The government this week released draft regulations formally designating the banking, telecommunications and digital platforms sectors under the framework, alongside a position paper detailing how scam disputes would be resolved.

Under the proposed model, scam complaints involving losses of up to $3,000 would generally be handled through automatic or semi-automatic processes, with victims likely to be reimbursed by default once they have verified they were the target of a scam.

“Reimbursing low-value scam complaints provides a proportionate and efficient process to support quick resolution and minimise the cost of investigating complaints,” the position paper said.

Scam complaints involving losses greater than $3,000 would be subject to a more detailed investigation, with banks, telecommunications providers and digital platforms expected to cooperate and reach a shared position on how a complaint should be resolved.

Criticised from both sides

Consumer advocates and industry groups have attacked different aspects of the proposal.

Consumer groups argue the $3,000 threshold is too low and falls well short of reimbursement schemes in comparable jurisdictions. In the United Kingdom, for example, a similar scheme has a reimbursement cap of about $160,000.

Consumer Action Law Centre chief executive Stephanie Tonkin said the threshold should be increased to $10,000.

“The bill will be split across multiple businesses, it will save businesses the higher cost of dispute resolution, and the measure is really about saving capacity in the system for complex, high-value and multi-party scam disputes,” Tonkin said.

Asked why the threshold was so low, Assistant Treasurer and Minister for Financial Services Daniel Mulino said it was about making sure Australia wasn't seen as an easy target for scammers.

“What we want to do is to make sure that we don’t have the wrong incentives for perpetrators to see Australia as a soft target,” Mulino said in an interview on ABC Radio.

“We don’t want to have processes that are completely disproportionate to the value of the sum in dispute.”

Industry groups, meanwhile, argue automatic reimbursements could themselves become a target for fraud and say businesses should only be required to compensate victims where they have breached their obligations under the framework.

‘Honeypot’

The Australian Telecommunications Alliance said that there must be rigorous processes in place to ensure the scheme is not exploited by fraudsters.

“There is a significant risk that automatic compensation creates a honeypot for fraudsters,” Australian Telecommunications Alliance CEO Luke Coleman said.

“Other countries with automatic compensation models have seen fraudsters exploit the system, where they are deliberately scammed by someone they know and then seek compensation.

“Any compensation model must have rigorous checks and balances to validate claims and assess liability.”

Reimbursement should also only be required if a company has failed to comply with its obligations under the framework, the organisation said.

DIGI, which represents tech firms including Google, Meta, Microsoft and Apple, questioned the reimbursement scheme and said it could make Australia a “more attractive target for scammers”.

“An effective redress scheme requires proper investigation of claims, because an anti-scam system that pays compensation automatically without scrutiny will be scammed itself,” DIGI managing director Sunita Bose said.

Australian Banking Association CEO Simon Birmingham added that such a scheme may “incentivise scammers to target low-value opportunities”.

A two-year process

The requirements under the framework will come into effect from March next year, more than two years after the legislation sailed through Parliament.

The Consumer Action Law Centre described the delay as a “betrayal” of scam victims.

“This delay will cause unacceptable harm, with the latest data showing sophisticated scams are on the increase and more Australians are being robbed of billions of dollars with no clear access to justice or redress,” Tonkin said.

“For the most part, industry has done its best to drag out the consultation on rules and codes, limiting their liability and ensuring the path to implementation is painfully slow, all the while Australian families continue to be robbed and bear the financial burden in the midst of a cost-of-living crisis.”