SCOTTISH banks have been named and shamed amongst those most often found to be treating transfer scam victims unfairly in what has been described as "reimbursement lottery".

Most major banks have signed up to a voluntary reimbursement code on bank transfer scams, also known as authorised push payment fraud (APP), which not only instructs them to reimburse customers who are not at fault, but also to provide them with adequate support.

An investigation examining Financial Ombudsman Service (FOS) cases looking at which of the 22 UK banks are most often found to be treating authorised fraud victims unfairly found that nearly three in four of compalints were upheld in favour of the customer.

And it found that NatWest and the taxpayer-owned Royal Bank of Scotland - part of the same banking group - headed the list of those getting decisions over scams and reimbursement wrong - in nearly nine in 10 cases.

And Santander (82%) and Bank of Scotland (81%) follow closely behind.

The study covering cases over a year from April 2020 found fraud complaints against Lloyds Bank (78%), Revolut (77%) and Nationwide (74%) were also being upheld in favour of the victim.

The Herald: RBS customers

It comes just five months after a separate study found that many banks were still not prepared to voluntarily publish data to ensure customers were being treated fairly and consistently.

The UK’s major banks and building societies were contacted urging them to commit to publishing their reimbursement rates by Friday 28 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.

But almost all banks failed to do so - including the Edinburgh-based Tesco Bank, RBS owners Nat West Group and Bank of Scotland owners Lloyds Banking Group.

The new investigation carried out by the consumer organisation Which shines a light on how individual firms have been dealing with bank transfer scams, where customers have been unhappy with their banks’ response and taken their complaint to the FOS.

The number of new authorised fraud complaints - the vast majority of which are APP - made to the finance regulator more than doubled in 2020-21, from 3,600 to 7,770.

Authorised fraud also includes some card fraud, where the dispute is about whether the consumer authorised a payment or withdrawal with their card.

Which has called for much greater transparency about firms’ behaviour and approach to reimbursement - which would require the Payment SystThe Herald: ems Regulator (PSR) to make banks regularly publish data, including their reimbursement rates for all of the APP fraud cases they handle each year.

The group said: "The current reimbursement lottery leaves many victims facing an uphill struggle to recover their money when they have been targeted by criminals through no fault of their own."

The report also reveals the banks working with the FOS to settle cases quickly and those that are dragging their heels and making scam victims "suffer" for months, or even more than a year.

 

In the last financial year, it took nine and a half months for the FOS to resolve an authorised fraud complaint.

While 40 per cent of all complaints to the ombudsman are resolved within three months, this figure is just 20 per cent for complaints about authorised fraud.

The Which analysis shows that NatWest is very proactive when it comes to settling complaints before a view is issued, having settled 465 cases in relation to authorised fraud complaints covered by the voluntary reimbursement code since April 2020.

In stark contrast, HSBC settled fewer than 10 cases early, Santander settled 16, and Lloyds Banking Group - which includes Bank of Scotland and Halifax - settled 82.

All three also had a "disproportionate" number of authorised fraud cases still open at the end of the last financial year.

Which has called on the government to swiftly make the necessary changes to enable the PSR to introduce mandatory APP fraud reimbursement obligations on all firms using Faster Payments, with a "robust regime of regulatory oversight and enforcement".

Jenny Ross, Which money editor, said: “Fraud can have a devastating financial and emotional impact on victims, so it’s shocking that so many banks are failing to handle cases correctly, often wrongly and unfairly denying victims reimbursement. It's clear banks can't be trusted to make the right decision when it comes to reimbursing their customers who've fallen victim to APP scams.

“The payments regulator must urgently introduce mandatory and more robust requirements for all payment providers, to ensure that customers are protected and treated consistently when they fall victim to bank transfer scams. The government must swiftly take the necessary action to enable the regulator to introduce a reimbursement obligation on all firms using Faster Payments.”

A spokesman for the Lloyds Banking Group, which Bank of Scotland forms a part of, said: “Helping keep our customers’ money safe is our priority and we have sophisticated, multi-layered defences in place as well as a dedicated team working 24/7 to help protect them against scammers. We continue to work closely with FOS to help ensure we get it right first time for our customers.”

A spokesman for the Edinburgh-based state-backed RBS Group, now known as the Nat West Group said: “Our proactive stance and relationship with FOS has brought forward the settlement of many of our cases earlier than required. This is good for our customers because it ensures we achieve a fast resolution for their case. As a result of this our overturn rate for the period is inflated, we do however expect to see this normalise in 2022.”