Banks warned not to blame scam victims

The Financial Ombudsman Service has warned banks that they need to treat their customers better if they lose money to fraud and scams, rather than simply assuming they are at fault.

The Financial Ombudsman Service (FOS) wants banks to consider the sophistication of frauds and scams and not assume that their customers have been “grossly negligent.”

Banks regularly inform the FOS that scam victims have acted with gross negligence and therefore the bank isn’t liable for the money that has been lost. But, the watchdog has now responded saying that “there is a very high bar for being grossly negligent – and this is far more than just being careless.”

As criminals create increasingly sophisticated scams it is becoming more difficult for people to spot cons, with a 17% increase in complaints to the Ombudsman on last year.

The FOS gives the example of a scam reported earlier this year (and not for the first time) where fraudsters were cold-calling people claiming to be from the Ombudsman. The FOS’s own number even appeared on the Caller ID. The FOS never cold calls people and will never ask for payment, just as your bank will never ask for your password or PIN.

“Each year we see more than 8,000 cases involving fraud and scams – everything from disputed cash withdrawals and identity theft, through to mobile phone SIM-swaps and fake banking websites,” says Caroline Wayman, chief ombudsman and chief executive of the Financial Ombudsman Service.

“Where criminals are involved, both banks and their customers often tell us in strong terms that they haven’t done anything wrong.

“It’s not fair to automatically call a customer grossly negligent simply because they’ve fallen for a scam. That’s especially true in light of the sophisticated way criminals exploit banks’ security systems – and convince customers that their money is at risk.

“We often remind banks that they need to support what they’re saying with facts. And if they can’t do that, it’s likely we’ll tell them to cover the money their customer has lost.”

The banks themselves admit that there is “more to be done” to protect customers from increasingly sophisticated scams.

“Banks and building societies take the threat of fraud extremely seriously and invest millions in advanced fraud prevention systems to protect customers, stopping £2 out of every £3 of attempted fraud last year,” says Katy Worobec, managing director of economic crime at UK Finance. “But we know there is more to be done.”

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What counts as grossly negligent?

The FOS has warned that banks can simply mark every scam victim as ‘grossly negligent’ in order to avoid covering the losses. But, there are certain things you should avoid doing if you want to protect your cash.

The examples given by the watchdog include keeping your PIN with your bank card or giving someone else your security details.

Earlier this year Metro Bank refused to refund a customer who was scammed after he entered his bank login details into a fake website; the case has since been referred to the Ombudsman.

In a response to the FOS’s warning, UK Finance stated: “We recognise the challenges created by the lack of a statutory definition of the term ‘gross negligence’.

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Are you the victim of a scam?

You can contact Action Fraud by phone (0300 123 2040) or on their website. If your institution is refusing to compensate you, you can contact the Financial Ombudsman Service on 0800 023 4567 or fill in a complaint form online.