Only 46% of bank scam losses reimbursed

Less than half of bank transfer scam losses, which amount to £700,000 every day, have been compensated under a new voluntary reimbursement code.

UK Finance figures reveal that a total of £412.9 million has been lost across 189,000 cases of bank transfer fraud between the introduction of the code in May 2019 and the end of 2020.

This equates to £707,000 a day, £29,000 an hour or £491 a minute.

Research from Which? found that only 46 per cent of losses have been reimbursed by banks under the code.

As a result, £225 million has not been returned to victims, meaning they have been left to shoulder net losses at a rate of £384,000 a day, £16,000 an hour or £267 a minute.

The consumer organisation said that it has been two years since the reimbursement code launched, but that large numbers of scams are still taking place and the huge sums of money being lost “highlight how systemic issues with protections for this type of crime remain.”

“The code makes it clear that if the customer is not at fault then they should be reimbursed, but Which?, as well as the Financial Ombudsman Service (FOS) and other consumer advocates, have repeatedly found banks are incorrectly deciding not to return their losses,” said Which?.

This, it warned, includes cases where victims are subjected to the highly sophisticated tactics used by fraudsters, or where banks have not done an effective job of warning customers about the threat of being scammed.

“Despite huge sums being lost on a daily basis, low reimbursement rates based on inconsistent and unfair decisions by firms demonstrate how the voluntary code isn’t providing the safeguards promised to victims of bank transfer scams,” said Gareth Shaw, head of money, Which?. "Two years on from the code’s introduction, it is clear that the Payment Systems Regulator must now take decisive action to prevent the continued devastation caused by this type of fraud.”

Official figures from the Lending Standards Board have shown that banks signed up to the code hold victims fully or partially responsible for being scammed up to 77 per cent of the time.

Decisions published by the Financial Ombudsman Service also show that in some cases banks are setting unrealistic expectations on customers to spot and prevent fraud, or that warnings to customers about the threat of being scammed are not up to scratch.

Which? points to a case where a Bank of Scotland customer was left £27,000 out of pocket after falling victim to a sophisticated investment scam that involved making payments to a cloned company via telephone banking. The bank denied reimbursement, but the
Ombudsman upheld the customer’s complaint after finding the bank missed “three clear opportunities” to discuss the transfers before they were completed, and believed that the customer wouldn’t have made the payments at all if provided with warnings.

A HSBC customer was also denied full reimbursement after being scammed out of £548 when booking flights for his family through a fraudulent travel website.

The bank argued that the customer should only receive partial reimbursement, as while it acknowledged that it hadn’t done enough to warn him about this type of scam, the customer should have done more checks to make sure the payee was genuine, such as checking the legitimacy of the company by “looking it up on Companies House”.

Shaw said that the code needs to introduce mandatory standards of consumer protection for all banks and payment providers and require greater transparency from firms on how they are dealing with this crime.

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