Consumer organization Which? has made a super-complaint to a financial regulator for the first time, as it seeks better protection for victims of bank fraud.

At present, consumers have no legal right to any form of compensation if they are tricked into transferring funds from their bank account to that of a fraudster or scammer. Victims are thus left hoping that their bank voluntarily takes remedial action, but in many cases banks take the view that if a customer authorised a transfer of funds then that is the end of the matter.

Seeking to change this, Which? has submitted a super-complaint to the Payment Systems Regulator (PSR), which is the economic regulator for the £75 trillion payment systems industry in the UK. The PSR is technically a division of the Financial Conduct Authority (FCA), although it operates independently. Which? has also notified the FCA of its super-complaint. The organisations now have 90 days to respond.

Which? has firstly asked that the PSR carries out an investigation to ascertain the scale of the problem, and to gauge just how much UK consumers are losing to bank fraud. In addition, it wishes to see the introduction of new rules in this area, and the introduction of greater legal liability for the banks when their customers fall victim to fraud. It notes that banks already reimburse customers if they are the victim of a scam involving a direct debit, credit or debit cards, or fraudulent activity on their account. The organisation adds that its research indicates 60% of people do not realise they have no legal protection should they be the subject of a transfer fraud.

Which? suggests two possible remedies. Under Option A, banks would be required to reimburse any victim of transfer fraud, except where the customer themselves acted fraudulently, or with gross negligence. Under Option B, banks would be required to meet more stringent standards for risk management, and would be required to reimburse victims where these standards had not been met.

Director of Policy and Campaigns at Which?, Alex Neill, said:

“We all now regularly use bank transfers to pay for things, but what most of us don’t realise is that if you’re conned into paying out money to a fraudster, you stand to lose all of your money, unlike when you use your credit or debit card.
“With scams on the rise, consumers can only protect themselves so far, and we believe that banks must do more to tackle bank-transfer fraud and safeguard their customers from scams.”

Christopher Woolard, Director of Strategy and Competition at the FCA, acknowledged receipt of the super-complaint by saying:
“We know that fraudsters can use sophisticated tactics, including phishing and vishing, to dupe even the most financially aware consumers. We will work together with the PSR as they investigate this super-complaint.”
Katy Worobec, director of Financial Fraud Action UK, summed up many of the issues associated with bank transfers at present. Firstly, she highlighted the measures banks already take to try and prevent fraud, by saying:
“Banks take fraud extremely seriously and use advanced security systems which last year stopped £8 in £10 of attempted remote banking fraud.”
However, she acknowledged that the current arrangement did not fully protect customers, by adding:
“Banks are legally obligated to fulfil a customer’s request to transfer money even if they have warned the customer they are at risk of a potential scam.
“A blanket approach [fusion_builder_container hundred_percent=”yes” overflow=”visible”][fusion_builder_row][fusion_builder_column type=”1_1″ background_position=”left top” background_color=”” border_size=”” border_color=”” border_style=”solid” spacing=”yes” background_image=”” background_repeat=”no-repeat” padding=”” margin_top=”0px” margin_bottom=”0px” class=”” id=”” animation_type=”” animation_speed=”0.3″ animation_direction=”left” hide_on_mobile=”no” center_content=”no” min_height=”none”][to compensating all transfer fraud victims] is equivalent to asking an insurance policy to pay out for theft when the front door was left wide open.”
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