It’s a lottery: Scam victims miss out on bank refunds

‘Lack of fairness or transparency’

BLAMELESS victims of sophisticated bank scams are being left thousands of pounds out of pocket because of a refund ‘lottery’.

Under rules introduced in May last year, banks are meant to refund fraud victims who have taken reasonable care to protect themselves.

Yet firms continue to wriggle out of paying refunds and treat customers ‘unfairly or inconsistently’, according to Which?

The consumer champion warned that banks regularly blamed customers for missing warnings and not doing enough to realise they were being scammed.

The refund scheme was introduced following a major campaign by this paper. It is voluntary, but major banks including Barclays, Co-operative Bank, HSBC, Lloyds Banking Group, Metro Bank, Nationwide, NatWest, Santander and Starling Bank have all signed up.

Yet fewer than half of fraud victims – 41 per cent – are getting their money back, according to the Payment Systems Regulator. In one case, a Lloyds Bank customer is still £33,000 out of pocket after falling victim to a so- called spoofing scam, in which fraudsters call or text from what appears to be a legitimate number.

Which? said she was told by the bank she could not have a refund because she did not take ‘sufficient steps’ to verify the text message or person she spoke to on the phone were genuine.

In another case, Nationwide initially offered only a partial reimbursement to a customer who was scammed out of £4,000 after his builder’s email account was hacked. This was despite the bank admitting it had failed to provide adequate warnings to the customer before the payment was made. He eventually received a full refund, Which? added.

Which? said banks had unreasonable expectations of the steps customers should have taken to verify a payment was legitimate.

This means victims of highly sophisticated scams, where fraudsters are able to quote financial and personal details and use manipulative tactics, are being denied refunds.

Which? added that banks were also not doing enough to protect the vulnerable. Under the code, they are required to reimburse vulnerable customers regardless of their actions.

The consumer group heard from one customer who was defrauded out of £20,000 while undergoing extensive medical treatment. Santander initially refused reimbursement but the customer later received a refund.

Gareth Shaw, head of money at Which?, said: ‘The scams code is a landmark milestone in the fight against fraud, but our analysis has found clear issues with how banks are meeting its core objective of reimbursing blameless people who have lost money through bank transfer scams.

‘Even as this type of crime continues to surge, 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.’ Katy Worobec, managing director of Economic Crime at UK Finance, said: ‘We agree that a voluntary agreement alone is not enough, and new legislation is required to address issues of liability and reimbursement.

‘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.’

WITH a 33 per cent increase in financial fraud since the start of lockdown, confidence tricksters are plying their wicked trade more widely than ever.

They target the most vulnerable and the most trusting – often the elderly – to steal the money they have saved over a lifetime of thrift and endeavour.

Yet blameless victims of sophisticated scams are being punished twice – first by the swindler who plunders their accounts, then by banks saying it was their own fault. Under a ground- breaking scheme introduced in May last year, banks agreed that where there had been no obvious negligence, they would reimburse customers who had fallen victim to these plausible sharks.

But research by Which? shows they are frequently wriggling out of paying. Fewer than half of victims get their money back.

Having generated such fury over the financial crash and more recently by shutting thousands of vital branches and ATMs, the refund scheme suggested the banks have actually started listening. But have they?

The sums involved are tiny for a major financial institution. For the victims, however, they are life-changing losses.

The banks signed up to a fair and decent solution. Now they must honour it. And if they won’t do it voluntarily, the financial regulator should show some teeth and make them do it.