Interactive Investor

Banks refuse to repay 60% of fraud victims

28th April 2021 15:22

Marc Shoffman from interactive investor

Investors the least likely to be repaid once scammed, research finds.

Banks are turning down compensation for 77% of fraud victims and blaming them for their losses, despite industry commitments not to.

Most of the main high street banks and building societies have signed up to a voluntary code from the Lending Standards Board (LSB) that pledges to reimburse victims of scams unless it is believed the customer's own negligence led to the fraud.

This typically applies to authorised push payment (APP) frauds, where someone unwittingly transfers money from their own bank account to a scammer.

Consumer watchdog Which? analysed LSB data from when the code was launched in July 2019 to May 2020.

The figures show banks told 77% of fraud victims that they were partially or fully to blame for losses.

Customers were found to be fully at fault for 60% of payments, so didn’t get any money back.

Another 17% were assessed as ‘shared blame’, where the customer’s bank or the receiving bank accepted partial responsibility, which means victims got some of their money back.

Only 11% of payments were assessed as ‘no blame’, where victims were refunded in full.

Victims of investment scams were the least likely to be reimbursed, with customers at fault in 67% of cases.

Gareth Shaw, head of money at Which?, warns the voluntary code is not enough to protect victims who can lose “life-changing sums of money”.

He adds: “The regulator must work with the government to establish mandatory standards of consumer protection for all banks and payment providers, with strong enforcement to ensure that people are treated fairly and consistently.

“It must also urgently order banks to regularly publish reimbursement rates, so consumers can clearly see how their bank chooses to treat victims of crime and how well they are tackling bank transfer fraud.”

Banking trade body UK Finance says £147 million of losses were reimbursed to victims under the APP voluntary code in 2020, equivalent to 47% of losses in these cases.

This is up from 41% in 2019 and more than double the 19% of APP losses that were reimbursed before the code was introduced.

A UK Finance spokesperson says: “Fraud has a devastating emotional impact on victims and the money stolen goes on to fund serious organised crime, so the banking industry's primary focus is on stopping these scams happening in the first place.

 “Other industries also have a role to play in tackling fraud, and therefore any data publication should also include statistics on the proportion and value of APP cases originating from enablers such as social media and other online platforms.”

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