When is a guarantee not a guarantee?

money-back-guaranteeWhen your bank promised you that you would never suffer financial loss due to being a victim of fraud, I’ll bet that you thought that it meant that you would never suffer financial loss due to being a victim of fraud. This is not quite true. It’s not because the bank is lying. It simply uses a different meaning for the word ‘fraud’ to the one that you or a court of law normally use.

The banks only recognise two varieties of fraud.

1. Cyber-Fraud. The leaky and insecure systems of the banks allow thieves, or even bank staff, to steal large amounts of cash from accounts every day. As the banks have allowed this money to be stolen, they obviously have to replace it. This is not a guarantee, they simply do what the law requires them to do. Also this is not ‘fraud’ it is incompetence.

2. Card Fraud. In practice this means that if you are subject to ‘courier fraud’, and hand over your card and your PIN to a stranger, you could be compensated for your losses, even though you have broken the terms of your agreement. On the other hand, if you fall victim to one of the other frauds which involve the fraudster posing as your bank, you can whistle for your money.

Whether the fraud is based on misuse of cards, or on the fraudster acquiring security details of online banking, the customers’ apparently reckless behaviour is caused by their utter conviction that they are complying with instructions from their bank. They have no doubt of this, because they will have contacted the bank themselves. After all, the banks advise them to take just this action if they need to reassure themselves that they are speaking to a genuine bank employee.

Of course, whether anyone is reimbursed or not is at the discretion of the banks. Their customers are no longer able to challenge them in a court of law.

You could argue that people who have fallen into these traps don’t deserve to be compensated, and you could be right. This misses the point though, because banks are required by the regulator to act fairly. They should pay both of these classes of customer or neither. Currently the banks see no reason to honour their obligations or to act fairly.

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