The UK’s financial ombudsman has told banks they should not automatically blame the victims of increasingly sophisticated “push payment scams” that con customers out of hundreds of millions of pounds a year and should take a fairer approach to compensation.
In a report published on Wednesday, the Financial Ombudsman Service threw its weight behind consumers targeted by “authorised push payment” scams, whereby fraudsters trick people out of money, often via online or mobile banking, by posing as trusted individuals such as bank staff or lawyers.
Almost one-third of the £730m lost in scams in 2017 was owing to push payment fraud, with some people losing “life-changing” sums, including home buyers scammed into transferring large amounts to fraudsters posing as their conveyancing solicitor, the report said.
Banks have often avoided paying compensation to push fraud victims because customers authorised the payments, and have accused customers of negligence. But this month new rules will force banks to better protect consumers by introducing round-the-clock fraud detection lines and faster response times.
Caroline Wayman, chief ombudsman, said this week it was “not fair to automatically call a customer grossly negligent simply because they’ve fallen for a scam”.
Victims lost £236m in total to push payment scams in 2017, according to the ombudsman and UK Finance, with 43,875 reported cases. The overwhelming majority of victims were individual consumers, losing almost £3,000 each on average, which in many cases they were unable to retrieve.
According to independent forensic fraud investigator Richard Emery of 4Keys International, some individuals have lost far more. He estimated that since 2014 about 50,000 customers had suffered losses totalling around £1bn — an average of £20,000 each that they have not been able to recover.
According to UK Finance, an association representing the finance industry operating in the UK, a lack of legal recourse for victims meant that push payment fraud victims were reimbursed just 26 per cent of the £236m lost in 2017.
One victim, Sophie Spencer, told the FT she had been scammed out of more than £30,000 after falling foul of a fraudster who warned her that her NatWest account had been compromised. Ms Spencer used an “activation code” sent to her via text that resulted in her account being drained, money she has not been able to recover in full.
According to the ombudsman another customer, Brian, lost £7,000 after fraudsters pretended to be representing his bank and asked him to key in a security code in order to prevent a scam on his account. The text messages came from the same number and went into the same chain as an old conversation with his bank so did not arouse suspicion. He was reimbursed after the ombudsman stepped in.
In 2017, the ombudsman saw more than 8,000 cases where customers had complained to their banks about scams ranging from disputed card transactions to identity theft and online banking fraud.
Responding to the ombudsman’s report, Katy Worobec, managing director of economic crime at UK Finance, said banks and building societies had stopped two-thirds of all attempted fraud, in money terms, last year.
“But we know there is more to be done,” she said. “Banks will always make every effort to help a customer recover any stolen funds and the industry has introduced new standards on how banks respond to scam victims.”
The Payment Systems Regulator has devised a new industry code to require victims to be compensated as long as they take due care. The code goes out for consultation this month.
The ombudsman also reported quarterly data on Wednesday revealing a spike in complaints about payday loan companies between April and June 2018.
Payday loans were the second most complained about product after payment protection insurance, with almost 11,000 new cases opened compared with just over 3,000 at the same point the previous year.