BACKGROUND

Banks are to refund fraud victims via a new compensation scheme following a landmark ruling against Santander. Customers have been conned by increasingly sophisticated frauds and banks have been refusing to pay compensation in cases where neither they nor the customer was to blame.

This precedent and ruling made by the Ombudsman has forced the banks to voluntarily act collectively before being forced to following a press campaign by the Daily Mail. The aim is to have the compensation scheme implemented before the end of 2019.

HOW THE SCAMMERS WORK

The scammers have been posing as bank staff, solicitors, HMRC staff and Police officers to trick customers in to paying about £1m a day via ‘authorised push payment fraud’ to accounts controlled by the scammers. This figure could be much higher as many victims are probably too embarrassed and ashamed to come forward.

Banks have refused to reimburse customers up to now on the basis that the transactions were authorised by the customers. Customers now have up to 6 years to appeal against closed decisions that were ruled against them.

OMBUDSMAN RULING

The Ombudsman ruled in the Santander case that the customer was ‘a victim of a sophisticated scam with social engineering at the very heart of it’ and had not authorised the transactions or acted with gross negligence.

This will initially be funded by the banks although it is expected that it will be funded possibly by a levy on transactions, so customers will end up paying for it in the long run.

The banks need to tighten up their systems and protections and make more of a concerted effort to recover the losses with tougher penalties, rather than just pass it on to the customers indirectly to fund a compensation scheme.

A new hotline for victims of bank fraud has been introduced, although the Government needs to introduce a more cohesive approach to tackle this head-on.

I have personally been a victim of Amazon fraud and PayPal fraud and I have spent a lifetime working in financial services, so it can happen to anyone.

What scams and frauds have you been a victim of? if so, what was the outcome?

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