Consumers should only be held responsible for financial loss from scams if they’re guilty of “gross negligence”, according to the Financial Ombudsman Service (FOS).
The financial arbitration service says banks must not automatically assume that their customers are at fault if they have been affected by a scam.
According to the FOS, new technologies with “loopholes” are often to blame for fraudsters’ activities. This means that third parties are responsible for financial losses, which leaves banks reluctant to compensate customers who have lost out.
Data from banking industry trade body UK Finance shows banks prevented nearly £1.5 billion of fraud in 2017. Nevertheless, more than £730 million was still lost by customers.
On Tuesday, Moneywise reported on NatWest’s refusal to help a customer who fell victim to fraud. The customer lost £5,000 through a ‘push-payment scam’, which means a real-time payment was made that was irrevocable. The bank deemed the customer negligent, even though its security systems were breached using very little data.
Caroline Wayman, the chief ombudsman, says: “We often hear from banks that their customers have acted with ‘gross negligence’ – and this means they’re not liable for the money their customer has lost. However, gross negligence is more than just being careless or negligent.
“The evolution of criminals’ methods – in particular, their sophisticated use of technology and manipulative “social engineering” – means it’s an increasingly difficult case to make.”
Ms Wayman says common methods used by scammers include duplicate banking websites or phishing text messages that appear to be from a provider.
In its response to the FOS’s report on fraud and scams, Katy Worobec, managing director of Economic crime at UK Finance, comments: “Banks and building societies take the threat of fraud extremely serious and invest millions in advanced fraud prevention systems to protect customers, stopping £2 out of every £3 of attempted fraud last year. But we know there is more to be done.
“Banks will always make every effort to help a customer recover any stolen funds and the industry has introduced new standards on how banks respond to scam victims.”