Will new safe­guards be good enough?

A new code seeks to pro­tect vic­tims but does it go far enough? Sam Mead­ows in­ves­ti­gates

The Sunday Telegraph - Money & Business - - Money -

New rules that lay out when vic­tims of bank trans­fer fraud should be re­im­bursed re­main lit­tered with holes, ex­perts have said. The new code is the cul­mi­na­tion of months of work by a steer­ing group set up by the Pay­ment Sys­tems Reg­u­la­tor (PSR). It is de­signed to pro­vide cer­tainty to vic­tims in the face of a grow­ing prob­lem that saw crim­i­nals steal £145m in the first half of this year.

Un­der the rules, cus­tomers who took all rea­son­able pre­cau­tions will be re­funded if their bank failed to live up to the re­quired stan­dards. These in­clude pro­vid­ing a spe­cific warn­ing if there is a risk of fraud, tak­ing part in anti-fraud aware­ness cam­paigns and freez­ing funds as soon as they are iden­ti­fied as po­ten­tial crime pro­ceeds.

But con­sumer watch­dogs ar­gue that far more needs to be done. Jenni Allen of Which? said: “The new code will only be judged a suc­cess when banks’ ac­tions to pro­tect their cus­tomers re­sult in fewer scams and those tar­geted by these so­phis­ti­cated crim­i­nals are treated fairly and re­im­bursed swiftly.”

Here is what Tele­graph Money be­lieves needs to hap­pen be­fore it can be deemed a vic­tory.

En­force­ment as soon as pos­si­ble

Tele­graph Money had un­der­stood that the code would ef­fec­tively be in use from the day the con­sul­ta­tion was an­nounced. The PSR said the Fi­nan­cial Om­buds­man would be­gin to take it into ac­count when mak­ing de­ci­sions.

How­ever, a source close to the dis­cus­sions said this re­quire­ment had been qui­etly dropped and, ow­ing to a lack of con­sen­sus on sev­eral key is­sues, the code was not yet “in force” – although the five banks on the steer­ing com­mit­tee (Bar­clays, Lloyds, HSBC, Metro Bank and RBS) have agreed to bring the code into force im­me­di­ately. The code is in any case vol­un­tary, although it is ex­pected that all banks will adopt it.

A fur­ther is­sue is that the code will not be ret­ro­spec­tive. That means that peo­ple who have lost out al­ready will have lit­tle hope of re­dress.

Don’t give banks a get-out clause

Con­sumer ex­perts have said that the code must not be­come a way for banks to avoid pay­ing up on a tech­ni­cal­ity.

Banks will now have to give spe­cific warn­ings to cus­tomers if there is a risk of fraud and will not have to re­im­burse cus­tomers who ig­nore them. They could take the form of the sort launched by San­tander last week. When they set up a new payee, cus­tomers will have to tell the bank the pur­pose for the money trans­fer and will then re­ceive a tai­lored alert.

Mar­tyn James, of com­plaints ser­vice Re­solver, said he was con­cerned that con­sumers could be­come fa­tigued by fre­quent pop-up fraud warn­ings and that banks could use them as a “get-out clause”.

He added: “The banks have to con­tinue to adapt as fraud­sters adapt. If I were a fraud­ster I would phone you up, talk you into mak­ing the trans­fer and say it’s go­ing to come up with a se­ries of warn­ings but don’t worry about them, your money’s safe.

“We don’t want to see banks us­ing this as an ex­cuse not to pay.”

Agree on ‘no blame’ re­funds

One of the cru­cial dis­agree­ments laid out in the con­sul­ta­tion doc­u­ments is a

lack of agree­ment on who re­funds the de­frauded in the “no-blame” sce­nario.

The steer­ing group agreed that con­sumers should be re­im­bursed, but it ap­pears that the banks are re­luc­tant to fund re­im­burse­ment when they have not breached their own rules. The con­sul­ta­tion doc­u­ment ad­mits that cus­tomers of the five banks that have adopted the code who fall vic­tim in these cir­cum­stances in the next few months are un­likely to be re­im­bursed.

Among the op­tions given for fund­ing these re­funds is a charge on all high-value bank trans­ac­tions and an in­sur­ance pol­icy to be sold when a con­sumer makes a high-risk trans­fer.

James Da­ley, of con­sumer group Fairer Fi­nance, said it would not be right for costs to be passed on to cus­tomers. He added: “If banks can’t build sys­tems that pro­tect from fraud, that is their prob­lem. They shouldn’t make con­sumers pay.”

Adapt­ing as fraud evolves

It is also vi­tal that any code adapts as fraud meth­ods evolve. Mr James said crim­i­nals con­stantly changed tac­tics and rules could quickly be­come out­dated. The steer­ing group was set up for the pur­pose of cre­at­ing the code and there is cur­rently no agree­ment on who will man­age it in fu­ture. The PSR and UK Fi­nance, the bank­ing trade body, both said they were the right bod­ies to take on this task.

Have you fallen vic­tim to a bank­ing scam? We want to hear about your ex­pe­ri­ence. Email sam.mead­ows@tele­graph.co.uk

Some banks have agreed to en­force the new code im­me­di­ately

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