7 May 2019

Fraud victims left vulnerable under banks’ new fraud refund code

A new voluntary code, which many high street banks have signed up to, is set to come into force on May 28, aimed at tackling bank transfer fraud. Crucially, it allows those who find themselves a victim of such a fraud to claim a refund from their bank if they themselves are blameless.

This is a hugely welcome move by the banks. Until now, fraud victims have often been left on their own with no route to recover their losses. However, there is concern that it will leave vulnerable victims at risk of losing out because it is not clear who is judged to be vulnerable under the new code. When a customer is identified as being vulnerable, the bank due to pay out will find it harder to prove that that customer was to blame.

So how do we define a person as vulnerable? Traditionally we may have only looked towards age and disability. However, countless external factors may mean someone is vulnerable to such scams, and it is not easy to set a definition.

Those looking to the code for guidance are left searching. Each case is to be assessed on its individual merits. Many people would hesitate to identify themselves as vulnerable, so they could easily slip through the safety net the code is aiming to create.

Consumers lose millions a year to sophisticated fraudsters and only a small percentage is ever recovered. The new code is meant to allow consumers to reclaim their losses, provided they are able to prove they did nothing wrong. However, it is yet to be seen whether the code will be effective in protecting those most at risk of such crimes.

Where the bank fails on their part to protect the customer, they will be liable to reimburse them. But will the position of no-blame scenarios change? The current position is that the banks will pay where blame cannot be attributed to either party.

That situation will only continue until the end of 2019 and the position thereafter seems unclear at the moment. This makes the protection which will be afforded by the code to those who find themselves the victim of such scams even less certain.

It should however be noted that any unsuccessful claim can be appealed and complaints should be directed to the Financial Ombudsman.

The developments which follow the implementation date will hopefully clarify the position, but at this stage the code could fall short of the standard it wishes to achieve.

What should you do if you find yourself a victim of fraud?

If you believe you have been a victim of fraud, you should take these steps immediately:

– Contact your bank (making sure the details you use are genuine)
– Make them aware of what has happened
– If required, contact the bank to which you sent the funds (your bank should be able to assist with this)
– Report the issue to Action Fraud.

For more information, please contact Adam Finch on 01242 211 635 or at afinch@hcrlaw.com.

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Adam Finch, Partner
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