New Banking Commitments
The commitments introduced by the NZBA are preventative measures, intended to ensure customers are aware of risks and are warned before making suspicious payments. Many of the new commitments reflect changes that banks have already rolled out in their efforts to combat scams. The changes will require banks to:
- Issue “specific education” warnings for high-risk transactions and unusual activity
Banks will ask customers about the purpose of proposed payments and, where this purpose creates concern, provide specific warnings about known scams.
- Provide a confirmation of payee service for certain online banking services
A confirmation of payee service will be mandatory for retail mobile and web-banking. This service allows consumers to check that the name of their intended payee matches the holder of the account that the payment is directed to.
- Identify and react to high-risk transactions
Banks will also need to have policies and processes in place to identify high risk transactions and respond accordingly. This may involve the banks questioning customers, providing real-time warnings, imposing transaction delays or blocking payments.
What amounts to a “high risk transaction” will likely depend on factors including the customer’s typical banking activity and a payment’s value, type or timing. Training must also be provided to staff to enable them to identify and respond to indicators that a customer is being scammed or is the victim of fraud.
- Provide a 24/7 reporting helpline
Banks must establish a 24/7 reporting channel. Banks will need to provide clear information to customers about what to do when they discover they are being scammed and act quickly to protect the customer. Investigations into reported scams and attempts to recover lost funds are required to be completed in a reasonable timeframe.
- Share information with other banks and freeze funds
Finally, members of the NZBA will need to share data and information with one another to help prevent scams, stop fraudulent payments, recover lost funds quickly, and close illegitimate accounts. Members of the NZBA will also need to cooperate to freeze and recover lost funds.
Authorised payment reimbursement of up to NZ$500,000 (conditions apply)
Banks have also agreed to reimburse customers who are scammed into authorising payments, in certain circumstances where they (or the recipient bank) do not meet their commitments above.
A customer will be eligible for reimbursement in circumstances where they:
- are a consumer as defined under the Consumer Guarantees Act 1993 (i.e., they are using the account for personal purposes);
- make a payment to a New Zealand bank account after 30 November 2025;
- are not using a third-party payment service to make the payment;
- are not buying goods or services on social media or another equivalent online marketplace;
- are not dishonest or fraudulent;
- report the scam to the bank and the Police within three months of discovering the scam and within 12 months of the most recent payment; and
- co-operate and respond quickly to reasonable information requests from the bank.
Eligible customers may have some or all of the loss suffered reimbursed by their bank, though the amount reimbursed will depend on whether the customer exercised reasonable care.
Banks will have discretion to reimburse their customers for authorised payment scam losses that exceed a combined total of NZ$500,000, or that occur more than three times within a banking relationship. The loss recoverable will be limited to the direct financial losses caused by the scam, i.e. the amount transferred from the customer’s account.
This voluntary scheme represents a significant increase in protection afforded to customers and is a notable departure from the standard of care that the law otherwise imposes on banks executing customers’ payment instructions.
Unauthorised payment reimbursement
Where scammers have gained access to a customer’s account or card and made unauthorised payments without the customer’s authority, banks will compensate customers’ losses where the customer:
- was not dishonest or negligent;
- took reasonable steps to protect themselves; and
- cooperated and responded quickly to reasonable requests for information.
All three limbs highlight the importance of customers taking care in relation to scams, and in particular co-operating with their bank. Banks may decline to compensate customers who have been negligent.
The amendments provide a number of examples of “reasonable steps” customers can take protect themselves.
Comment
Regulators, legislators, and Courts around the world have all had to grapple with how to respond to the increase in sophisticated online frauds and scams. These industry-led reforms in New Zealand aim to strike a balance that recognises both that prevention is the best protection, and that both banks and their customers have a role to play in avoiding losses from scams.
Many banks have already taken steps to protect their customers in line with these announced amendments. The amended Code of Banking Practice will, however, go live from 30 November 2025.
If you have any questions about the matters raised in this article, please get in touch with the contacts listed or your usual Bell Gully adviser.