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Rise In Victims Hit Twice By Scammers Worries Banking Ombudsman

A growing number of bank customers are falling foul of scammers a second time as ‘recovery room scams’ take off, says Banking Ombudsman Nicola Sladden.

Ms Sladden said recovery room scammers posed as online agencies offering to help victims recover their funds, but the upfront fee they charged merely amounted to another scam because they offered no real help, and victims never saw any of their money again.

"The most insidious thing about these scams is they prey on people who have already suffered heavy financial losses and are desperate to recoup those losses," said Ms Sladden. "We’ve seen more and more of these cases in recent months. Invariably, victims lose even more money - and involving such agencies sometimes prejudices their ability to recover their funds."

Recovery room scammers operate through websites and claim to be experts in helping scam victims recover their funds. They claim to work with customers to build a strong case to force the return of funds from the merchant or original scammer.

However, Ms Sladden said these so-called experts have a poor understanding of banking practices and the rights and obligations of banks and consumers under New Zealand law.

Recovery room scammers typically send customers a standardised letter to pass on to their bank arguing why they should be reimbursed for their losses. The arguments are deeply flawed in fact or law. They assert, for example, that a regulator must physically inspect a merchant’s premises before the merchant can accept a payment, or that a lack of regulatory reach over online merchants means the merchants cannot provide the goods or services in question. The letters also frequently make reference to international standards that do not apply in New Zealand or to non-existent legislation or incorrect statements of law.

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"These arguments serve only to confuse the situation and result in delays or misunderstandings that can hinder banks’ efforts to recover payments."

Ms Sladden said that in one recent case, a customer engaged a recovery room agency after he lost $350,000 in an investment scam - only to lose another $45,000 to the agency. It pressured him into making the payment, saying it was a prerequisite to starting the retrieval process. Despite the agency’s website saying it offered a 100 per cent money-back guarantee and was successful in more than 95 per cent of cases, the customer never saw any of his money again.

Ms Sladden said customers should approach their bank directly for help, as banks have teams dedicated to helping scammed customers recover their money. She adds that the Banking Ombudsman Scheme can offer independent advice and assistance to scam victims as they deal with their bank.

She also urged banks to do better to support scam victims and inform them of other support available, such as the Police, Victim Support and IDCare.

For more information on scams, see the Banking Ombudsman Scheme’s:

Quick Guide to recovery room scams

Quick Guide to scams

Scams tip sheet

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