Consumer watchdog Which? says banks should show how many customers are repaid money from accounts lost due to fraud. Most large banks compensate some funds to customers who are defrauded by criminals and publish information on compensation rates as a group, with only Barclays and TSB committing to doing so individually.
Which? says Banks must be made to come clean about how much money victims of bank transfer scams are being reimbursed, as research by the company has found that firms are not prepared to voluntarily publish data to ensure customers are treated fairly and consistently.
Which? contacted the UK’s major banks and building societies urging them to commit to publishing their reimbursement rates by Friday 28th May, which marked two years since the introduction of an industry code that many banks have signed up to, which pledges to reimburse losses to victims who are not at fault.
However, almost all banks failed to do so. Barclays, which last month provided reimbursement figures for the first two months of the year, was the only firm to say they were ready to publish “periodically”. This leaves it as the only organisation apart from TSB, which is not a member of the code but does have a ‘Fraud Refund Guarantee’, to provide any information on the amount of money it returns to customers who have fallen victim to this type of scam.
Which? has called on the Payments Systems Regulator to change this and force disclosure of the level of repayments. Analysis shows that around £147 million was reimbursed to victims in 2020, with this equivalent to 47% of losses. This was up from 41 percent in 2019, and more than double the 19% of losses reimbursed before a voluntary code committing banks to reimbursing customers was introduced.
Currently, information about the levels of reimbursement individual banks provide to customers under the scams code is published anonymously – with reimbursement rates across firms last year ranging from a low of 18 per cent to a high of 64 per cent, according to the PSR.
In contrast, TSB says it reimburses 99 per cent of customers. Barclays said its figure was 74 per cent for the first two months of 2021.
Banks that are not part of the voluntary code face even less scrutiny, and there is no clarity about how much money is being returned to customers by firms, even on an anonymous basis.
Which? believes the complete lack of transparency in how individual banks are treating customers is leading to unfair and inconsistent decisions, meaning that firms can easily wriggle out of their responsibility to reimburse victims, and is a contributing factor to low levels of reimbursement under the scams code.
Reasons that banks gave for not publishing included:
Publishing reimbursement rates alone would not give a full picture of an organisation’s ability to prevent fraud and protect its customers, and that a wider range of information – such as data on where scams have originated – is required to give a fuller picture.
A low reimbursement rate could signify that a bank has high levels of fraud prevention and that the scams that do get through could be more likely to involve customer error.
Releasing data publicly could potentially drive criminal behaviour towards specific firms perceived to have weaker fraud protections.
A belief that it detracts from the need to focus on the criminals and growing threat of financial crime.
Which? does not believe that any of the points raised prevent banks from being more transparent. It says that Banks should be publishing data beyond reimbursement rates if that is needed to evidence what they are doing to prevent and manage cases of bank transfer scams. The consumer champion also says that publishing data does not pose a significant fraud risk to firms, and could actually help to drive improvements that reduce scams.
While the regulator says there is a “possibility” that there is a connection between high levels of fraud prevention and low reimbursement rates, Which? believes firms’ interpretation of ‘customer error’ is often flawed.
This has been highlighted by the Financial Ombudsman Service (FOS) which says it continues to uphold a “high proportion” of bank transfer scam cases. Decisions published by the FOS have shown examples of firms placing unrealistic expectations on customers to spot they are being scammed, or that the warnings put in place are not sufficient.
And rather than detracting from a focus on crime, TSB has found that since introducing its guarantee, victims are willing to provide much more detailed information relating to their cases, which helps to inform the bank’s fraud preventative measures.
Which? believes that the response from industry shows that the regulator has no choice but to act on its proposals to improve transparency from firms on how they deal with bank transfer scams, including reimbursement. Stronger consumer protections, that all firms must follow, are also needed to fix an unfair and inconsistent industry approach to reimbursement for blameless victims.
Gareth Shaw, Head of Money at Which?, said “Banks are continuing to hide behind a cloak of anonymity instead of demonstrating their commitment to protecting customers from the devastating impact of bank transfer fraud by publishing their reimbursement rates.”
“Without greater transparency, inconsistent and unfair treatment of scam victims will continue, and the chances of having their losses returned will remain a lottery.”
“This situation cannot continue. The Payment Systems Regulator must now take action and order all firms to publish this information regularly and in full, as part of a range of measures to resolve the systemic problems with how victims of this crime are handled.”