Fraud complaints to the Financial Ombudsman Service have surged by 40% over the past year, as ever more victims are tricked into transferring money to criminals. Yet a new security measure for online payments, which could help combat the fraudsters, has been pushed back by nine months.
Banks have been given more time to implement the ‘confirmation of payee’ system, which double-checks whether the name on an online transfer matches the person or company that owns the account.
Shortly after the delay was announced, the Financial Ombudsman Service reported that the number complaints about the way banks handle fraud and scams in the 2018-19 tax year has hit an all-time high.
Which? launched a super-complaint in 2017, calling on banks and regulators to better protect vulnerable consumers who mistakenly transfer money to fraudsters.
Here, we explore the surge in fraud and reveal when vital new protections – including confirmation of payee and a voluntary code of conduct championed by Which? – will be introduced.
Bank and fraud scam complaints surge
The Financial Ombudsman Service (FOS) resolves cases when consumers and financial firms can’t agree on a dispute. And increasingly, this includes victims of scammers fighting for refunds from their banks.
In the 2018-19 financial year, the service received 12,195 complaints from consumers about fraud and scams, compared with 6,952 in the previous tax year – a 43% increase. This was a record total for the service, which started collecting statistics in 2015-16.
Authorised push payment (APP) fraud, which describes a person being tricked into transferring money to a scammer, is one of the fastest-growing types of fraud, according to the FOS.
Since 2017, consumers and businesses have lost a total of £381m to APP fraud, and often have no way of getting their money back.
Caroline Wayman, chief ombudsman, said banks were ‘not always treating victims of fraud fairly and must do better’.
Name-checking service delayed for big banks
The rising number of complaints about bank and fraud scams comes as no surprise to Which?.
Almost three years ago, we launched a super-complaint to the PSR urging it to investigate the rise of bank transfer fraud, and have been campaigning for better protections ever since.
Following the PSR’s investigation, banks committed to introducing a measure called ‘confirmation of payee’. This additional security feature will double-check whether the name entered into your online bank transfer matches the sort code and account number on record.
If you use a similar name or make a small mistake, the bank will ask you to make a minor change. However, if the details are completely different, the bank will warn you that the details do not match.
Either way, you’ll still be able to go ahead with the payment if you choose to. The system will help stop fraudsters pretending to be a person or organisation the victim trusts.
Originally, the Payment Systems Regulator (PSR) proposed a deadline of 1 July 2019 for banks to start issuing confirmation of payee checks to their customers. However, the PSR is now consulting on a new deadline of 31 March 2020.
How do other banks treat victims of fraud?
In addition to confirmation of payee, Which? has worked with the banking industry to develop a new voluntary code of conduct, which will allow innocent victims to claim reimbursement for their lost funds.
The code will take effect on 28 May. Under the new rules, banks should reimburse customers who lose money to a scam within 15 working days of their claim, or 35 if the bank needs to investigate further.
However, you’ll also have to take care. The bank can refuse reimbursement if you:
- Ignored warnings about scams when setting up and amending payees, or before making a payment.
- Did not take care to establish that the person you’re sending money to is legitimate.
- Were ‘grossly negligent’ – although this is very difficult to define.
- Are a small business or charity and did not follow internal procedures for making payments.
- Acted dishonestly when you reported the scam.
Which? urges banks to sign up to code
At present, the code and reimbursement scheme are both voluntary.
Which? is urging all banks, building societies, and service providers to sign up to the code to ensure victims are fully protected.
Gareth Shaw, head of money at Which?, said: ‘Bank transfer fraud is spiralling out of control, with people losing life-changing sums every day and then facing a gruelling battle to get their money back from the very banks that should be preventing them from falling victim in the first place.
‘Banks have just two weeks to sign up to the new industry code, which will only be deemed a success if they finally halt this worsening crime by offering better protection to their customers, while swiftly and fairly reimbursing all those who lose money through no fault of their own.’
To date, the following banks have committed to the code: Barclays, Lloyds Banking Group, HSBC, Metro Bank, Royal Bank of Scotland, Santander, Nationwide.
TSB has gone even further. Last month, it launched a Fraud Guarantee, pledging to refund all victims of fraud – even if they handed their details to a fraudster or sent money directly to a criminal.
You can join our campaign by signing the petition calling for the government to safeguard us from scams.
Help for victims of scams
Until the voluntary code kicks in, you may struggle to claw back your funds if you authorise a payment to a scammer.
If you believe you have been scammed, you should contact your bank or card provider immediately. You’ll need to provide the sort code and bank account number to which you sent the money. Your bank will work with the receiving bank to recover the money.
We’ve written a template letter to help you make a formal complaint to your bank if you were a victim of a bank transfer or APP scam.
You have grounds to complain if either the sending or receiving bank fails to try and recover the funds properly, or if the bank has contributed in some way to the scam.
If you don’t get reimbursed and are unhappy with your bank, you can escalate your complaint to the financial ombudsman who will investigate what happened and what your bank did.
You should also report the scam to Action Fraud which will give you a crime reference number.
Find out more: how to get money back after a scam