Melissa Clarke:
Victims of scams could be automatically reimbursed up to $3,000 by their bank under a plan being considered by the federal government. It’s seeking feedback on its scam protection framework which will cover how banks, telcos and digital platforms deal with scammers. They’ll need to have stronger systems in place to prevent scams by March next year and be prepared to cover the costs of most scam victims. I spoke to the Assistant Treasurer a short time ago.
Daniel Mulino. Thank you very much for speaking to AM this morning.
Daniel Mulino:
Oh, thanks very much for having me on.
Clarke:
Now, the government’s released this position paper on how the scam protection framework will operate. It proposes reimbursing people who’ve been scammed. How would that work?
Mulino:
Yeah, so look, scams are a very insidious form of crime that affect people in everyday transactions where they should be able to feel safe. So, last term we passed the Scams Prevention Framework legislation which adopts a world leading ecosystem approach, drawing in 3 sectors, banking, telecommunications and digital platforms.
What we’re doing today is putting a lot of meat on the bones of that legislative framework. We’re now putting into the public realm designation instruments which I’ve signed off, which indicate exactly who’s in and who’s out of this framework. We’re putting out 3 draft codes which specify the obligations for organisations under the code.
And we’re also putting out a discussion paper in relation to dispute resolution and that will indicate how losses should be allocated across different entities within the ecosystem. But also for smaller losses, $3,000 and under, what we’re proposing is that there should be automatic payment to consumers where they can verify that there has been a scam.
Clarke:
How would you decide whether it’s reasonable that someone should be reimbursed? What’s the threshold? Because of course people need to take their own responsibilities to make sure that they’re not undertaking risky behaviour. So, would this apply across the board or is there a standard that has to be met before someone could be reimbursed?
Mulino:
So, where there are larger scams above $3,000 and there are some scams that get into the 6 figures, some investment scams, some romance scams, and that’s where dispute resolution processes would come into play. There’s internal dispute resolution where, as much as possible, we would want disputes to be resolved between the companies and the individuals. So, that would be banks, telecommunications and digital platforms.
Where that can’t occur, it would go to a body called AFCA, which is a body set up to informally resolve disputes in the financial services sector. And there they would take into account whether there has been a breach by the various entities involved and also take into account the behaviour of the consumer. So, in some instances there might, for example, have been warnings by the bank about the likelihood of there being a scam. They’d look at all the particular circumstances of each case.
Clarke:
Would that apply to those lower‑value scams that are under $3,000 as well?
Mulino:
So, what we’re looking for is a scheme with the under $3,000 scams, where it’s much more automated or semi‑automated. It’s really not going to make sense to have tens of thousands of cases in that realm swamp the dispute resolution process. That would lead to huge costs and also delays. So, we want to have some kind of automated or semi‑automated process and we’re consulting on that.
Clarke:
If we look at some examples overseas, like the UK, where they have a process of automatic reimbursement, I think their threshold is something closer to £48,000, a much higher one. Why did you not want to have a threshold at that level?
Mulino:
So, 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. But the balance is that with very small claims, we don’t want to have processes that are completely disproportionate to the value of the sum in dispute.
And so automatic payments below $3,000, I think are going to make sense. They also are a very high proportion of the total number of claims, but they’re not a particularly high proportion of losses. So, we can then have the dispute resolution processes focus on those very large cases.
Clarke:
Now, you mentioned that this is also the process of designating exactly which institutions would be engaged in this. Banks, telcos and digital platforms. I think most people can probably get a grip on the banks and the telcos, but which digital platforms are you talking about that would have to be working in this scam framework?
Mulino:
So, within this realm it would be a very wide net that’s cast in relation to all 3 of those sectors. So, it would capture all of the digital platforms, essentially. It’s basically any digital platform with a certain number of users and more than a billion dollars turnover globally. So, that’s going to capture pretty much all of them. And we really need to have a wide net cast in relation to scams, because we want the whole system to be as robust as possible.
Clarke:
When it comes to a process of automatically reimbursing people for $3,000 or under, is there a risk that it makes people a bit complacent about the transactions they’re making?
Mulino:
So, it would still involve disruption for that person. It would still involve a lot of stress. And I think that the likelihood of people becoming blasé, and a lot of people, to be honest, won’t necessarily know that there are these arrangements in place until they’ve been scammed. And people, to be honest, don’t know they’re being scammed until after the fact. So, we’re going to be conscious of that risk.
And also, the other side of it is we don’t want to create an environment where there’s an incentive on perpetrators to bombard our system more. We’re going to monitor those risks. But I’m confident that a balanced approach where it’s just the very small transactions will see reasonable outcomes.
Clarke:
Daniel Mulino, thanks very much for speaking to AM this morning.
Mulino:
Thanks very much, Mel.