Bank scam victims face refund “lottery”

Victims of bank transfer scams are being treated unfairly or inconsistently when trying to get their money back, according to a study by Which?, the consumer group.

A voluntary industry reimbursement scheme was set up a year ago to make it easier for victims of bank transfer fraud to be refunded in cases where neither they, nor their bank, was to blame.

However, Which? found that only 41 per cent of customer claims made under the code were successful, a figure it described as “woefully low”.

It compiled a dossier of dozens of cases showing how some banks were denying customers reimbursement, including blaming customers for missing warnings, or not doing enough to realise that they were being scammed.

Gareth Shaw, head of Money at Which?, said: “The lack of fairness, consistency or transparency across the industry means that the chances of people getting their money back is often a total lottery.

“A voluntary approach to tackling bank transfer fraud has failed. Banks, regulators and government must work together to make the code mandatory and ensure that strong standards on reimbursement are introduced.”

Which? said that banks were relying far too heavily on their own judgments, and often had unreasonable expectations of the steps that customers should have taken to verify that payments were legitimate.

It found instances where highly sophisticated scams were dismissed as “no fault” claims, including the use of ‘number spoofing’ where criminals make it appear they are phoning from contact numbers on the back of a victim’s bank card. Text messages from banks can also be spoofed in this way.

In one case, Which? said a Lloyds Bank customer lost £33,000 to a number spoofing scam and was denied reimbursement as the bank felt she did not take “sufficient steps” to verify that the communications were legitimate.

Which? said that customers should be reimbursed in “the vast majority” of cases involving spoofing, as it could “fundamentally change the circumstances under which victims are making judgments about who they are transferring money to”.

In other claims that were knocked back, fraudsters were able to quote financial and personal details, or had used manipulative tactics to pressure customers into making a transfer over days or even weeks.

Which? also questioned the efficacy of warning messages when customers transfer money online. In another case, Nationwide customer was initially only offered partial reimbursement after being scammed out of £4,000 when his builder’s email account was hacked. Nationwide admitted that it had failed to provide adequate warnings to the customer before the payment was made, and did eventually provide a full refund.

There are also concerns about how banks manage cases involving vulnerable customers. One customer was defrauded out of £20,000 while undergoing extensive medical treatment. Santander initially refused reimbursement, on the basis that she confirmed that she had read the fraud message and was comfortable to continue with the payment, but later reviewed the case and made a full refund.

The consumer group believes that if companies are relying on using a customer’s response to warnings to reject reimbursement, then it must demonstrate that these warnings are actually successful at reducing the likelihood of a fraud succeeding. It said these warnings should be subject to much more rigorous testing and customer feedback.

It also believes that companies need to take a more realistic approach when it comes to making reimbursement decisions based on whether the customer could have done more to verify whether a payment is legitimate. In addition, it wants all payment service providers to submit data on the number and level of bank transfer fraud and reimbursements.

In response, UK Finance, the banking trade body, said the voluntary code had established stronger customer protection standards and “more than doubled” the proportion of losses being refunded.

“We agree that a voluntary agreement alone is not enough, and new legislation is required to address issues of liability and reimbursement,” said Katy Worobec, managing director of economic crime at UK Finance.

“With criminal gangs continuing to target customers, the government and regulators should consider as a priority how data breaches and vulnerabilities in other sectors such as telecoms and social media are facilitating these crimes, as part of an overall strategy to protect consumers from harm.”

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