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Out of pocket from bank fraud?

Saving | Current Accounts Helpful? 3

Asked by montresor, submitted 24 May 2010.

Open Quote On two occasions the representative of the British Bankers' Association repeated, on Working Lunch, that banks must prove that customers were negligent, in the case of fraud, in order to avoid refunding the money stolen.Yet recent newspaper reports show that banks are flouting the Law and the FSA seem unwilling to act against the banks.That leaves the customer with the only option to take the banks to court.

That is not feasible to many people.What is the point of the FSA when they can't or won't uphold the Law? They seem to let financial businesses do what they like instead of protecting the public! There does not seem to be an organisation that can or willing to protect customers.This is worrying because anyone can be subject to fraud and banks ignore the Law and the FSA is not interested.
End Quote

Answered by Justin on 26 May 2010

Banks and building societies are subject to the FSA’s Banking Conduct of Business Sourcebook (BCOBS), which replaced the Banking Code last November (although banks had until 1 May this year to implement a few of the changes).

BCOBS, which you can view here if you want, states:

If you deny authorising a payment then it’s up to the bank to prove that it was authorised. If unauthorised then they must, within a reasonable period of time, refund in full.

However, if an unauthorised payment arises from lost/stolen bank account details/cards then you can be liable for up to £50 of losses incurred before you made the bank aware of the issue. The bank can only hold you liable for all losses if it can prove you acted fraudulently.

If you think a bank or building society has acted against these rules by not refunding unauthorised payments then you can take your complaint to the Financial Ombudsman Service who will, hopefully, apply some common sense and uphold valid complaints.

But you’re right; there have been some horror stories of individuals suffering unauthorised payments and having to resort to the courts before their bank repays their money. I guess the reason banks are sometimes reticent or slow to re-instate losses is that there are criminals seeking to profit from such claims – as usual it’s the actions of a minority who spoil things for the majority.

This is all worrying as bank fraud continues to grow according to CIFAS, the UK’s fraud prevention service. It identified 80,125 instances of bank account fraud over 2009, an increase of 7,117 on the previous year, although credit card fraud fell by about the same amount over the period to 63,396 cases.

The best piece of advice I can give is to be careful and inform your bank or building society ASAP if you suspect an unauthorised payment or believe that your security has been compromised (e.g. passwords/account details/cards have been lost or stolen).

You can buy identity theft/fraud insurance if you’re especially worried, although given your loss should be no more than £50 these policies are of questionable value.

I agree that the FSA should police its rules more stringently. Given fraudulent claims are no doubt rising I can understand the banks wanting to investigate some claims, which can delay re-imbursement. But sadly what often seems to be lacking in these large corporations is common sense, a problem that’s all too common these days with the growth of call centres and scripted staff.

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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Readers' Comments (2) - To post a comment please register or login .

Comment by moneypenny at 2:43pm on 28 May 2010:

I could have been out of pocket due to fraud a couple of times but luckily the security department have telephoned to ask if it was my transaction so I haven't lost out. I believe one case was an 'inside job' as the card used is only ever used online but someone tried to buy a £600 computer. I didn't hear any more about it.

Comment by webwiz at 6:40pm on 29 May 2010:

I have twice had fraudulent use of my credit card number used "with cardholder not present" but on both occasions the credit card companies (two different ones) spotted it before I even received the statement. I don't know how, but they seem to have efficient means of detecting fraud and based on my own experience to date I am quite happy with the situation. The number of credit frauds must be looked at in the context of the number of losses and theft of cash which would occur if there were no credit cards