Banks are ordered to refund fraud victims… and could face fines if they do not treat them fairly 


Banks are ordered to refund fraud victims… and could face fines if they do not treat them fairly










Big banks who fail to tackle fraud will be named and shamed under plans to ensure more victims get their money back.

In a victory for the Daily Mail, regulators will be able to force the largest firms to stick to strict refund rules.

Banks and building societies will also have to publish data on fraud prevention and reimbursement rates – and could be fined if they do not treat victims fairly. 

Bank customers faced a lottery when it came to refunds, as different companies interpreted the rules in different ways ¿ allowing them to reject payouts (file photo)

Bank customers faced a lottery when it came to refunds, as different companies interpreted the rules in different ways – allowing them to reject payouts (file photo)

Eight-month wait for cash  

Linda and Ralph Brodie were scammed out of £21,000 – but HSBC offered to refund only half of it.

The bank said Mr Brodie, 74, did not make enough checks to ensure he knew who he was paying after a phone fraudster posed as an HSBC employee. The couple, from Cambridgeshire, complained to the Financial Ombudsman but faced an eight-month wait for the verdict.

Mrs Brodie, 71, said: ‘We knew the code was voluntary and interpretations are inconsistent. We spent months worrying and were astonished when the ombudsman ruled in our favour.’ HSBC finally refunded the couple in full.

Linda and Ralph Brodie (pictured) were scammed out of £21,000 ¿ but HSBC offered to refund only half of it.

Linda and Ralph Brodie (pictured) were scammed out of £21,000 – but HSBC offered to refund only half of it.

 

Fraud has soared since the Covid crisis began, with criminals stealing the equivalent of £4million every day in the first half of this year.

So-called authorised push payment (APP) fraud – when victims are tricked into transferring money to a fraudster – increased 71 per cent year-on-year as losses hit £355million.

A voluntary code of conduct was launched in 2019 to refund blameless targets of scams – but just nine banks signed up. Less than half of fraud victims got their money back under the scheme.

Bank customers faced a lottery when it came to refunds, as different companies interpreted the rules in different ways – allowing them to reject payouts.

One three-month period last year saw an unnamed bank issue refunds in just 1 per cent of cases.

The Financial Ombudsman, which settles disputes between banks and their customers, has ruled in favour of three-quarters of scam victims refused refunds.

Now, under new proposals from the Payment Systems Regulator (PSR), the system will go from a voluntary code to a mandatory one, underpinned by law.

In addition, data will be published regularly to reveal which banks are used by fraudsters to move stolen money. It is hoped the move will force banks to improve security to protect their reputations – and bottom lines.

Chris Hemsley of the PSR said the plans ‘will put the onus on financial institutions to get better at detecting and preventing scams’. The plan represents a victory for the Mail’s Stop the Bank Scammers campaign, which has long called for action to tackle the fraud epidemic.

Banks said other organisations – such as social media giants – should be forced to do their part, too.

…But others get it right  

 David Bale was scammed out of £6,000 by fraudsters pretending to be from his bank. Thankfully, he was swiftly reimbursed by TSB – which pledged two years ago to refund all customers in full.

The 77-year-old from Peterborough said it was a ‘shame’ other banks had to be ‘forced’ into action. ‘They should be doing everything to protect their clients,’ he added.

Katy Worobec of industry group UK Finance said: ‘We agree that more needs to be done and have long called for a regulated code, backed by legislation, to ensure consumer protections apply consistently. As the PSR recognises, other industries have a key role to play in tackling fraud, which is why it’s so important that there is co-ordinated action from government and other sectors to tackle what is now a national security threat.’

Treasury minister John Glen said the Government ‘will legislate to address any barriers to regulatory action at the earliest opportunity’. A consultation on the proposals will run until January. Rules on fraud data will apply to Barclays, HSBC, Lloyds, Metro Bank, Monzo, NatWest, Nationwide, Santander, Starling Bank, the Co-Op, TSB and Virgin, as well as AIB and Northern Bank in Northern Ireland.

Richard Emery, from fraud consultancy 4Keys International, said: ‘Publishing scam data is crucial… [but] we need more firms to be transparent.’

He added: ‘My worry with mandatory refunds is that banks will find another way to wriggle out of paying.’ 

Q&A 

 What do the proposals mean for scam victims?

Bank customers will be refunded if they are tricked into making a transfer. Fraudsters often pose as genuine organisations such as banks or HMRC to manipulate victims into sending cash.

What about banks?

Banks will now be unable to opt out of offering refunds to customers targeted by fraudsters. In addition, a dozen UK firms will have to publish their scam data every six months. This will include what proportion of fraud victims are left out of pocket, as well as the number of fraudulent payments sent and received.

Will everyone get refunds?

No. As with the current code, there are likely to be exceptions. Customers who ignore a bank’s scam warnings – or do not take enough care to protect themselves – may be refused a refund.

Why didn’t the voluntary code solve the problem?

Only nine banks signed up. Some were accused of not complying – or interpreting the code in such a way that saved them cash. Refund rates were low, with more than half of those tricked by criminals denied refunds. Victims who fought back and took their case to the ombudsman found that three in four decisions were upheld in their favour.

When will the new rules come into force?

The Payment Systems Regulator (PSR) is calling for views on the proposals by January 14 for consultation. The Government will then need to introduce legislation for the refund rules to become mandatory. It says it will do this ‘at the earliest opportunity’.

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