Banks accused of denying reimbursement to scam victims

24 January 2020

Current account providers are ignoring new industry rules, according to Which?

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Which? has raised concerns that some of the UK’s biggest banks are refusing to reimburse blameless victims of transfer fraud, despite the introduction of new industry standards intended to protect fraud victims.

A voluntary code was introduced in May 2019 that would ensure innocent victims get their money back – but Which? has heard from a number of people who say they have been denied reimbursement unfairly.

Fraud warnings

The consumer champion described a “worrying trend” of banks relying on fraud warnings to justify not refunding customers. It says these decisions from banks fly in the face of the voluntary code most banks have signed up to, which pledges to reimburse all blameless victims.

Online or mobile banking customers now often see fraud warnings when transferring money, as banks introduce a range of features aimed at making a customer think twice about whether they are being scammed.

However, a Which? survey found that almost half (49%) of people are not aware that new fraud warnings have been introduced by banks – it says this is further evidence that victims should not be arbitrarily turned down for reimbursement because they have “ignored warnings”.

Working with experts, Which? also analysed the effectiveness of banks’ fraud warnings, to establish whether they are adequately “understandable, clear, impactful, timely and specific” – as set out in the code. The experts raised concerns about elements of the warnings from some of Britain’s biggest banks.

Generic messages

One researcher voiced concerns over the “generic” messages displayed by First Direct, HSBC, Lloyds, Natwest and Royal Bank of Scotland. Petko Kusev, from Huddersfield Business School, said that it was perfectly rational for customers to ignore generic information when conducting bank transfers.

A second researcher, Patrick Fagan from Goldsmiths University, suggested that some warnings can come too late, as once people have already been targeted by scammers they typically commit to seeing the action through.

Which? supports the introduction of fraud warnings but says if a bank can’t prove its warnings are effective then the customer should not be deemed at fault.

The consumer champion also wants the industry code to be made mandatory for all current account providers as many haven’t signed up.

Jenny Ross, Which? money editor, says: “People are losing life-changing sums of money every day to devastating bank transfer fraud – so it’s shocking that some current account providers still haven’t signed up to offer their customers vital protections.

“All banks must prove that their online warnings are up to scratch – especially if they are denying victims reimbursement, as we’ve seen in some cases.”

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