1 in 10 that lose money due to card fraud should get refunds

credit card fraud

ONE in ten consumers who are currently held liable when they lose money as a result of fraud should be refunded by their bank instead, the Financial Conduct Authority (FCA) has said.

Just 3% of fraud victims are not refunded, usually because the bank believes that they were a part of the fraud or that they were grossly negligent, for example by failing to keep their personal details safe.

The rules are clear on this issue, so I want to find out if they are being applied properly right across the board.
Clive Adamson, FCA Director of Supervision

But the regulator says that banks are often unfairly holding consumers liable for losses.

Around 14,000 people a month are losing money as a result of fraud when the bank should really take the hit, the FCA estimated in a preliminary analysis into the issue.

The regulator will be carrying out a further investigation and, after the findings are published in October this year, could make banks refund consumers that were unfairly treated, as well as making sure banks start properly refunding new victims.

"The rules are clear on this issue, so I want to find out if they are being applied properly right across the board," Clive Adamson, director of supervision of the FCA, told The Times.

The rules on fraud

In their business plan for the next two years, released today, the FCA promised to, "ensure that firms are not placing unreasonable obstacles or responsibilities on their customers [when they lose money from fraud]".

For example, the regulator could rule that financial providers should make it a lot easier to claim back money when it's been lost through fraud.

Currently there is no formal standard for a consumer reporting a fraud and an overly complex process could put many off.

More on fraud
Liability more on your rights
Staying safe more here
PIN fraud more here

More troublingly, the FCA also warned that some firms were "unfairly rejecting claims".

Under the Lending Code, consumers cannot be held liable for more than £50 of fraud losses unless they were at fault and the onus is on the bank to prove fault.

Yet, the FCA says, many claims are dismissed without definitive proof that the consumer is at fault.

Fraud cases involving supposedly 'fraud proof' technology, such as chip and pin machines, are a particular sticking point.

Banks may be rejecting claims because they can't work out how the fraud could have been committed, if not for the consumer being at fault, but that is not proof.

Such cases look likely to increase, especially as the use of new payments systems, like banking apps, increases.

The mobile payments risk

In fact, this review is, in part, a response to the EU Payment Services Directive which requires banks to improve the protection that they offer to consumers in fraud cases.

The new directive is particularly concerned with how consumers are protected when they use digital payments platforms that may increase the risk of financial crime.

UK consumers now make 5.7 million transactions a day using smart phones and other mobile devices, the British Banking Association (BBA) revealed today.

The improved protection rules are likely to lead to higher volumes of mobile transactions.

As we've highlighted recently mobile banking apps can be extremely vulnerable to attack which are multiplying, for example with the launch of Paym.

FCA shake up consumer rights

This review into fraud is just one of many areas that the FCA is looking into as it seeks to establish itself.

The regulator now has more power than ever to force banks to refund consumers and, seemingly, a greater interest in doing so.

Just last month 30,900 Yorkshire Building Society customers were refunded an average of £247 after an FCA investigation found that households had been charged incorrectly.

The regulator is also looking into 'zombie funds', poorly performing investment and pensions products that consumers may hold for years without realising how meagre their rate of return is and, of course, at payday, though some have argued that those rules aren't protecting consumers enough.

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