Better compensation for scam victims from banks

New commitments by banks mean if a bank fails to adequately warn and protect a consumer from a scam, they will reimburse the victim up to $500,000. Photo/ Richard Robinson

Banks have responded to the Government’s expectation to better protect their customers from scams by introducing stronger safeguards and a compensation scheme, Commerce and Consumer Affairs Minister Scott Simpson says.

“New commitments from banks mean that if a bank fails to adequately warn and protect a consumer from a scam, they will reimburse the victim up to $500,000,” Simpson said.

“This is an important win for bank customers, who have been advocating for some time for better recognition from banks of the role they play as the final gate between a consumer and a scammer.”

Simpson said last year the Government wrote to banks outlining the expectation that banks take greater responsibility for protecting Kiwi consumers.

“I am pleased that banks have responded to this directive and are updating their Code of Banking Practice with five new commitments to better protect customers, including pre-transaction warnings and identification of high-risk transactions.

“Banks will also take a more active role in preventing scams, by participating in information sharing agreements across industry and government and educating people.”

Simpson said stopping scams before they happen is the best strategy.

“Online scams cause immense harm to our wider economy, as consumers lose confidence transacting online. The fear generated by scams runs directly counter to efforts to digitise our economy.

“While people still need to remain vigilant and take responsibility for their own online safety, these changes will enable consumers to check a payment is legitimate before transferring money,” Simpson said.

“I have been clear with banks that the journey doesn’t stop here. I expect banks to continue to prioritise security and adapt to the ever-evolving scams environment.

“I have made similar expectations clear to telecommunications companies and digital platforms and look forward to progressing a cross-industry approach with them.”

Simpson said improving the safety and ease of doing business is part of the Government’s plan to grow the economy.

The five commitments introduced to the New Zealand Banking Associate Code of Banking Practice are:

• A Confirmation of Payee service for customers to check that the name of the person they are paying matches the account number, which has already commenced roll-out.
• Pre-transaction warnings to consumers based on the payment purpose.
• Identification of and response to high-risk transactions or unusual account transaction activity, and the ability to block or delay transactions in some cases.
• Providing a 24/7 reporting channel for customers who think they’ve been scammed, and responding to protect accounts.
• Sharing scammer account information with other banks to help prevent criminal activity, and freezing funds where appropriate.

The updated code comes into force on November 30, 2025. This is to allow the banks time to get all the protections in place.