Getting your money back after a bank transfer scam shouldn’t be a lottery with less than a 50:50 chance of success, says Gareth Shaw.
In recent years the marketing campaigns of financial firms have focused on projecting themselves as caring and sentimental businesses, a theme that has only become more commonplace in recent months.
That is, unless you fall victim to a bank transfer scam.
Nowadays, fraudsters use hideously sophisticated tactics that any of us could fall for – criminals hacking your builder or solicitor and requesting money from you at exactly the time you were expecting to make a bank transfer. Or, using readily available software, they can insert a bogus message into a series of legitimate texts from your bank.
Most banks and building societies are signed up to a voluntary code which pledges to reimburse customers who have fallen victim to this type of fraud, implemented following a Which? super-complaint in 2016, when we took action to ensure better protection for customers.
However these supposed guardians of our money are now reportedly considering watering down the voluntary code’s standards on reimbursement, by proposing to remove entire categories of fraud.
Hundreds of millions lost in 2020
More than £200m was lost to authorised push payment fraud in the first half of 2020, and as our research today shows, lax security measures from banks and building societies could be granting criminals the tools to carry out this type of crime. Attempting to reduce fraud protections is exactly the opposite of what banks should be doing.
The voluntary code was initially based on the assumption that the victim should be reimbursed, and only in a limited number of circumstances should banks reject a customer.
However, some banks are unfairly denying reimbursement. In some cases that we’ve analysed, they are putting the blame on the customer for missing often inadequate warnings on their websites. And it’s not just us that believes this is too harsh – the organisation that oversees the code, the Lending Standards Board, thinks banks and building societies aren’t following the rules they agreed to.
This fundamentally undermines the protection offered to consumers that should ensure they get their money back.
Low rate of reimbursement
In fact, customers of banks signed up to the code stand less than a 50-50 chance of having all of their losses returned if they are tricked into handing money over to a criminal – at one bank, the figure stands at a pitiful 1 per cent according to research from the Payment Systems Regulator.
The Financial Ombudsman has consistently ruled against the banks when these cases go to appeal – but the banks should be getting the decisions right first time rather than subjecting their customers to suffer an ordeal that can last for months or even years to get a resolution.
The reimbursement rates for all the major banks are known to the industry and the payments watchdog, the Payment Systems Regulator, but neither will reveal them – a decision that makes it look like the banks are standing by each other, rather than with their customers.
The only bank prepared to break from the pack on fraud is TSB. It is not signed up to the voluntary code, but instead has its own guarantee to refund customers who fall victim to fraud. As a result, it’s reimbursement rate is close to 100 per cent.
Banks shouldn’t water down standards
The voluntary code that can let a bank pick and choose which rules it wants to apply with impunity doesn’t work, and an urgent overhaul is needed.
Far greater transparency is required. The industry must publish how much money each bank returns to customers who have fallen victim to this type of scam, so consumers can establish which banks are treating their customers fairly and consistently, and which ones abandon them – a move that would almost certainly drive up standards across the board.
The government should also work with regulators to make reimbursement for APP fraud mandatory. In the meantime, banks should continue to protect customers from all bank transfer scams.
Without taking these steps, there’ll be no end to the lottery that thousands of consumers face to get their money returned, and it’s possible that even greater odds will be stacked against them at a time when they most need support.
This is an adapted version of an article by Gareth Shaw originally published in The Herald.