Authorised Push Payment (APP) Fraud has been a scourge on society for many years.
Unwary victims are manipulated into sending payments to accounts controlled by fraudsters. Sometimes the victims believe they are sending money to a loved one who needs emergency support, or perhaps they’ve been told their account has been compromised and they need to move their money into a new “safe” account.
Based on the media attention this issue receives, you could be forgiven for thinking that it’s usually older adults who get conned this way. But over the last few years, I have seen an increasing number of students who are being caught out by these scams.
In some cases, students have lost eye-watering sums of money, meaning that they can no longer afford their studies. Between Brexit, the pandemic, the cost-of-living crisis and soaring inflation, students are already struggling to cover their basic costs. Which makes it all the more heartbreaking when the funding they do have gets stolen.
The good news
It is almost unheard of for a scam victim to get their money back again, unless they can somehow prove that their bank was negligent. So, I was delighted to see that the Financial Services and Markets Act was passed into law last month.
This new legislation should bolster the protection for victims of fraud so they can be reimbursed for their losses.
But, as is so often the case, the devil will be in the detail. It’s now the job of the Payment Systems Regulator (PSR) to implement the new measures to reduce the impact of fraud – and they have launched a consultation (open until 25th August) to get input on how this will work in practice.
In theory the PSR will:
- incentivise the payment industry to invest further in end-to-end fraud prevention by making every payment firm meet the cost of reimbursing
- increasing customer protections so most victims of APP fraud are swiftly reimbursed, boosting confidence in the UK payment ecosystem
- pursuing a long-term ambition for Pay.UK to take on a broader role and actively improve the rules governing Faster Payments to tackle fraud
Alongside the new requirement to reimburse victims, it will also increase transparency with a new “balanced scorecard” of APP fraud data, promoting intelligence sharing and expanding the rollout of the name-checking service Confirmation of Payee.
These are all positive steps – as long as those consumer groups are representative. However, if no one engages with this process on behalf of students, then they stand to be forgotten.
The bad news
As it stands, in developing its proposals, the PSR says it has considered the potential impacts of the new reimbursement requirement on vulnerable customers, including as part of its Equality Impact Assessment.
It says it has done this in line with the Financial Conduct Authority’s (FCA) guidance on the fair treatment of vulnerable customers, because consumers with some characteristics of vulnerability may be more likely to fall victim to scams:
Firms should consider consumers’ vulnerability and capacity to make decisions when deciding how to treat consumers who have been victims of scams or fraud.
Some types of vulnerability can impair decision-making, putting people at greater risk from social engineering and less able to exercise caution to protect themselves from APP fraud.
In those scenarios, there is therefore a weaker case for applying exceptions designed to incentivise “customer caution” to these types of vulnerable customers.
It even says that if a customer is deemed vulnerable for a specific APP fraud (applying above definition), the sending payment services provider must not apply the customer standard of caution (gross negligence) or claim excess.
The problem is that the document doesn’t mention students at all – and the danger is that subsequent approaches miss them and the way in which fraud can target them – especially international students.
Students as victims of fraud
I’ve spent the last few years highlighting the impact that APP Fraud has on students, including submitting evidence to the House of Lords Digital Fraud Committee inquiry.
In that evidence, I pointed that victims are likely to be students who feel isolated – and scams predominantly affect international students.
And this isn’t just about being new to the UK. Students have spoken of their difficulties integrating into social communities at university, so students may not have the interpersonal networks which enable them to quickly “sense check’ if something does not seem right.
Additionally, students who are experiencing loneliness are particularly vulnerable to “romance scams” or any scam which relies on the fraudster making an emotional connection with the victim.
Students also talk about being manipulated psychologically. The “Chinese Police/Embassy Scam”, which was particularly prevalent a couple of years ago, works by terrifying the student into thinking they are in serious trouble with the authorities. These psychological manipulations can be very subtle and multi-layered.
One student described how gentle the fraudsters were, as they convinced her that they were on her side and were working to help her demonstrate her innocence. Another student said he was befriended by a scammer who started up a remote romantic relationship with him, and then excitedly told him about a wonderful opportunity to invest in cryptocurrency.
As the student started to become wary about the amount he was investing, the scammer became very critical and intimidating, and used the relationship they had built up to coerce him into investing more money. This money was then stolen when it emerged the investment vehicle was fraudulent.
We also hear students expressing deep feelings of guilt and shame when they realise they have been defrauded. They are angry at themselves for having trusted someone they shouldn’t, and they are also afraid other people will be angry with them for having been so gullible.
In some cases, students have turned first to their parents for support. They are then further distressed by their parents’ reaction which might be intense anger or disappointment.
Students have expressed frustration at the lack of support from banking institutions. Some banks have implemented measures to encourage their customers to stop and think before they proceed with a transaction. However, as a result, the banks’ position is that the student is culpable, and that the bank will not take any action to try to recoup the student’s losses.
Respond to the consultation
Of course, universities and SUs try to raise awareness of scams as a risk – the “customer caution” approach. Orientation and induction materials include content designed to help students protect themselves, and we employ different modes of delivery to try to maximise the impact of this messaging. But it may not be enough.
In the early days of the cost of living crisis, Jim Dickinson was in despair at how many students were unable to access the energy bill support available to most households. I have seen firsthand the devastation that APP Fraud can have on students. It would be a cruel blow if students are unable to benefit from these increased protections available to other consumers.
I very much hope my colleagues and SUs will step up and ensure that on this issue, student concerns are properly heard.
There is less than a month to make sure that students are not, once again, a forgotten demographic. Please encourage students and their representatives to contribute to this consultation.
