TSB says it will refund customers who are victims of any type of fraud as part of its new fraud guarantee.
The move will cover customers who are tricked into authorising payments to fraudsters and unauthorised transactions.
The bank says customers will be refunded for any loss they’ve suffered from their account as a result of third-party fraud. Refunds for authorised transactions will be capped at £1 million per claim.
TSB’s fraud refund guarantee came into effect on 14 April, although it will not be applied retroactively. This means victims of push payment fraud may not get their money back if it occurred before this date.
The bank says it will not repay losses by customers who commit fraud on their own account or repeatedly ignore account safety advice.
The news comes after thousands of TSB customers were locked out of their accounts in April last year, some of whom were exploited by scammers.
Around 1.9 million online customers were locked out of their bank accounts and mobile apps. It happened when an upgrade involving migrating vast amounts of customer data to a new platform went wrong. TSB received more than 135,000 complaints and the cost of the meltdown reached £176 million.
Customers complained of being unable pay their credit cards and mortgage bills, leaving them facing charges. Some said that they were able to see the details of other customers.
Banks usually refund customers if money is taken from their account without them knowing.
However, victims of authorised push payment fraud – when the customer is tricked into authorising a payment to another account - have not been entitled to the same level of protection.
Banks frequently refuse to refund victims of this type of scam on the grounds that they authorised the transaction.
Figures from UK Finance show that over £1.2 billion was stolen by criminals committing bank fraud last year.
During the first half of 2018 consumers lost £145.4 million because of authorised push payment scams, while just £31 million was returned.
TSB’s executive chairman Richard Meddings says the bank wants to give its customers “peace of mind”.
He says: “The vast majority of fraud claims across UK banking are from innocent victims of fraud, who have been targeted by criminals and organised gangs. However, all too often these customers must fight to be refunded and are not treated as victims of crime.
“If a TSB customer innocently suffers a fraud loss on their account after being targeted by a criminal, we’ll cover it.”
Under a new code of conduct coming into force on 28 May, banking providers will cover losses for people who have been tricked into transferring their money to criminals in this way.
Banks will have to reimburse consumers for their losses provided they have taken reasonable care.
Criminals are becoming increasingly sophisticated. With push payment fraud criminals pose as someone who has been employed by the victim, such as a builder or solicitor.
The criminals then send the victim a fake invoice to get them to send money to a bank account controlled by the fraudster.