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Victims tricked into transferring scammers money granted better protection

New proposal by FCA would boost consumers' complaints power

People who unwittingly send bank transfers to scammers will have more scope to make a complaint, under FCA plans to increase the powers of the Financial Ombudsman Service.

The proposed change would allow victims to escalate complaints to the Financial Ombudsman Service if they are unhappy with the actions of the bank that received their funds.

Which? has been campaigning for better protection for victims of bank transfer fraud since it first filed a super-complaint in 2016.

We explain how victims will be protected and what you need to know about bank transfer fraud.


Complaints allowed to Financial Ombudsman Service

Currently, if you send money to a fraudster via bank transfer, your scope for recovering the funds is limited.

You may be able to complain to your own bank, but it will generally have no power to recover the money once it’s left your account.

Under current regulations, you have no right to complain if the bank that received your funds doesn’t take sufficient action – and if they refuse to help you or simply don’t respond, you can’t escalate your complaints to any authority.

The FCA has now proposed that banks and building societies which receive transfers related to a scam should be required to handle any complaints in line with the FCA’s handbook.

If the bank fails to do so, consumers would be able to make a complaint to the Financial Ombudsman Service, which would have the power to make a ruling and resolve the dispute.

A consultation on the proposed changes will run until 26 September.

What is a bank transfer scam?

These types of scams – also known as Authorised Push Payment or APP scams – describe a person being tricked into sending money to a scammer by bank transfer.

The number of victims is worryingly high – around 43,875 cases of bank transfer scams were recorded in 2017, totalling losses of £236m, according to figures from UK Finance.

One victim told Which? he had lost £10,000 to a fraudster while buying a house in 2017.

If you fall for a scam and pay by credit card, you can usually reverse the payment and recover your funds under Section 75 of the Consumer Credit Act. But if you pay by bank transfer, clawing back your funds is much more difficult.

Your own bank usually cannot cancel the payment, unless you act within a short timeframe.

From 1 January 2018, your bank is required to liaise with the bank that received the funds on your behalf to try to recover the money.

But, if you’re not happy with the way the receiving bank responds, you have no power to complain – a situation the FCA is now proposing to change.

  • Have you ripped off by a scam? Share your story with Which? and help us raise awareness by using our scams reporting tool.

Which? campaigns for better protection

Which? has been calling for action from the regulators since September 2016, when it launched a super-complaint urging the Payment Services Regulator to help protect victims of push payment scams.

In response, the PSR set out an action plan to encourage greater co-operation between banks, introduce anti-fraud measures and give victims more power to recover their funds.

The PSR has announced a contingent reimbursement scheme that would allow victims to claim a refund in some cases – with plans due to be delivered by the end of September 2018.

UK Finance has also introduced a set of best practices that all members have agreed to implement by September, which should improve their information sharing and response procedures.

Another step forward is the development of a ‘confirmation of payee‘ tool, which will require banks to check the name provided on the transfer against its account records – and alert the customer if the information doesn’t match. The tool is expected to be rolled out in late 2018.

Yet bank transfer scams remain a significant issue. In a Which? survey of 2,000 people from early May, one in 10 people reported having made a payment, or knowing someone who had made a payment, to someone who later turned out to be a fraudster.

If you want to support our campaign, you can sign our petition to put pressure on firms to do more about fraud.

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