Celebrity Bitcoin scam: my experience

I think we have to make allowances for people’s state of distress and inexperience, NFH. Not everyone has your superior knowledge of the complexities of the financial mechanisms. I think Johanna did very well to cope with what happened and with telling her story. In my view she is above criticism and I just hope that when I reach her age I will be able to address such new and abominable situations with the same composure. Having lived through different and safer times the older generation has a much more trusting attitude towards approaches from strangers than we might have and does not have the natural defences that we have acquired through experience and our knowledge of consumer affairs.

John, sorry if comments came across as criticising Johanna. I was criticising NatWest. My third paragraph was only to explain what I would have done, and what I hope readers will do if they experience anything similar.

I have to say that I’d have thought once Mrs Butt contacted the bank to stop the process that that then became the bank’s responsibility. The bank’s response to Mrs Butt’s pleas in saying because she’d apparently opened a trading account, there was nothing they could do even though she’d never authorised that, begs several questions:

1. Could the bank prove it was Mrs Butt who’d opened the trading account?
2. How easy is it to open a trading account when you’re not the account holder?
3. The bank stated nothing could be done when Mrs Butt attempted to cancel the payments, even though the money had not – at that stage – been taken. So what the bank was saying in effect was ‘If you choose to bank with us, bear in mind you will lose control over how we transfer your money.’ Why is an account holder unable to stop a transfer?

For me, and I suspect others, this epitomises the dismissive arrogance towards small account holders that seems to characterise the bank’s attitudes and dealings.

Those who, inexplicably to me, anyway, seek to apologise for the banks and continue to wonder whether they should bear any fiscal responsibility for malfeasance or incompetence should remember that Natwest and its curiously odd parent company – RBS – have a track record of squandering cash when it suits.

In 1997 it was fined £420,000 because of its accounting – or lack of it – in which the bonus culture at the bank was fingered. In 2000, they had to pay a further £750,000 for “a series of compliance failings”, and shortly afterwards were fined a further £500,000 for similar failings.

RBS behaved similarly poorly after the 2008 crisis, apparently imposing absurd limits on borrowing for small businesses and instituting obscenely large unauthorised overdraft charges on those least able to pay.

In 2012 both RBS and Natwest customers were left without the ability to withdraw money because of a massive software failure, an event some commentators at least partly attributed to the wholesale slashing of IT positions in the UK and their replacement by outsourcing work to India.

The questions should not be ‘Why were the poor banks having to pay compensation?’ but rather what will it take to make the banks start to behave as financial institutions should in a civilised society?

@awade, Amelia – Mrs Butt may not have realised in her long phone conversation that she was opening a trading account but it appears that is what she (inadvertently) authorised. No one else seems to have been involved in that “arrangement”, and certainly not her bank it would seem. So was the bank’s failure simply not to act on Mrs Butt’s request to stop payment that she had mistakenly instigated?

Online banking and transactions do require a degree of knowledge and precaution to carry them out safely. Mrs Butt realised that after the event. I wonder how you prevent people from making poor decisions in the face of convincing fraudsters? I’m not sure how practical that is other than restricting the kind of transactions they can make. In the same way we have https websites, supposedly secure, perhaps we could have a similar tag attached to known and above-board secure online traders and restrict some people’s transactions to them, without some separate authorisation.

Malcolm, it’s not a question of “who was negligent“, but who is responsible for remedying an unauthorised transaction. The onus is on the card issuer, a bank in this case, not on the customer. The card issuer does not bear the loss, but in turn charges the transaction back to the errant merchant. Although the card issuer has to do all the admin, it does not usually bear the loss except where a merchant goes out of business in the meantime.

Thanks NFH. I thought debit card reimbursement was discretionary? In the case of this possibly fraudulent arrangement that Mrs Butt got into, will the money be recoverable I wonder.

I am simply questioning how much responsibility individuals should take for their actions, what measures can be put in place to prevent them becoming involved in transactions they are not equipped to handle. If the card provider cannot recover the money from the errant merchant, and if they were not to know the merchant would be errant, then it is our money that is being used to provide compensation. I would not like to see that happen when it is not justified. It just increases costs to all of us.

Malcolm, no, it’s not discretionary. Unless the merchant or card issuer can prove that the transaction was authorised, then the card issuer must refund it according to Regulation 76 of the Payment Services Regulations 2017.

If the card issuer cannot recover it, because the card issuer took too long to take action and the merchant has since gone out of business, then that’s the card issuer’s problem. They need to act fast, and certainly much faster than in the case above.

The discretionary matters that you are thinking of is when a transaction was authorised but the goods or services were not subsequently supplied. That’s entirely different from transactions being unauthorised.

Natwest, it seems, may be even more culpable than it seems. Johanna tells us I was told because the payments were pending, there was nothing NatWest could do to stop them.

That’s untrue. A bank can, at the request of the account holder, stop a direct debit or pending payment up to 1530 on the day of payment.

This afternoon I rang my bank and asked how easy it was to set up a trading account. I was told it can’t be done over the ‘phone, and a visit to a branch would be necessary. I then asked whether anyone other than the account holder could set one up and was told there was no way that could be done.

To me, anyway, it makes it extremely clear that Johanna was a victim of a well organised crime. Combined with the inaccuracy of Natwest’s statement to her and the track record of the bank in paying bonuses to staff for identifying struggling businesses, denying them credit and then buying up the assets at rock bottom pricing before selling them at a profit (information from the BBC) it would seem inadvisable for anyone to use the RBS and its associated banks, such as Natwest.

Ian, you seem to be referring to bank transactions, e.g. direct debits. This is not about bank transactions but about card transactions. Card transactions are governed by card schemes (Visa and MasterCard), and apply both to credit cards and to debit cards. The 15:30 cut-off time to which you refer has nothing to do with card transactions.

Sorry, NFH; I didn’t make it clear that I’d also talked to the bank about debit card transactions which they confirmed could also be stopped by the authorised account holder. On that they gave no time limit.

With regard to your final paragraph, I can’t see banks, who are debit card issuers, persuading their customers to instead use credit cards, which are typically issued by other card issuers. All card issuers receive revenue on every transaction, and they’re not going to give that up or persuade their customers to use their competitors’ cards.

I agree NFH. All credit card issuers need to advise their customers of the risks of using debit cards with online and ‘phone transactions. Are you able to answer the question in the first paragraph of my 28/03/19 comment?

“Would the outcome have been different if she had
used her credit card instead?”

Did the scammer tell Joanne they only accept debit cards, in which case alarm bells should have started ringing?

The following is an example of some of the tactics used by scammers. youtube.com – Robert Cialdini – The Power of Persuasion.

Beryl, financial services providers generally accept only debit cards. If they also accept credit cards, then they are obliged to indicate to the card issuer that the transaction is a money purchase transaction (sometimes known as a “cash-like” transaction), which many credit card issuers charge as a cash advance with consequent fees and interest that make it uneconomical to use a credit card. There are ways around this, for example Curve, which is a debit card linked to an underlying credit card, but using Curve breaks the creditor-debtor-supplier relationship under Section 75.

For typical purchases of goods and services, you are right to suggest that consumers should use credit cards in order to enjoy protection under Section 75 of the Consumer Credit Act 1974.

What happened to you was theft, Alex, and the Police ought to have been investigating. One thing you said about Lloyds seeing ‘suspicious activity’ chimes with what others have said about Lloyds in particular, but I don’t know if you’d have any hope of getting anything back unless you could prove incompetence on their part. Which? Legal (subscription) might be able to help in this.

alfa, it is not always popular to try to inquire too deeply into a sorry story, nor appear critical of the way someone who has suffered a financial loss might have behaved. Ian has found this in the ” Using cash got me out of more than £50k of debt” where what seemed a sensible comment was deemed insensitive (my words) and temporarily removed.

However some of us like to try to get at all the facts and this often requires more information than is given in the introduction. If the aim of a Convo is to make progress in finding ways of dealing with problems like scams then the full story behind someone’s problem is necessary.

So I questioned at the outset just how Johanna not only authorised a £300 payment, but then in her conversation went on to, inadvertently, set up a trading account and allow further payments to be taken that she did not intend. However, there have been no answers to this, as far as I can see. So the question is left hanging; did Mrs Butt, by not understanding what she was doing, allow this to happen or did she do nothing amiss and it is purely down to a failure of her bank?

I presume this comment may be removed 🙂 . Make no mistake, I have sympathy with Mrs Butt’s plight but we have to consider how we prevent such problems, not just express sympathy. I’ve suggested limiting (voluntarily) the type of transaction and value that can be performed on an account if someone does not fully understand the system. Maybe a limit on how much money can be moved online, a delay when separate authorisation is required, a list of authorised payees perhaps as examples..