The FCA shows its teeth

promises

Banks have been economical with the truth for years when it comes to dealing with victims of fraud. They make promises that they have no intention of keeping. The FCA has finally noticed. I don’t know why it has taken so long. It has been blatantly obvious for years.

If you are a victim of bank fraud, and have not been grossly negligent yourself, your bank must pay you back. This is not a goodwill gesture. It is a regulation. The bank has no choice.

In 90% of cases, redress is made as it should be. The remaining 10% amounts to over 150,000 customers a year who are defrauded and not repaid. Their losses average out at several thousand pounds apiece. This is not 10% of fraud victims but 10% of those who qualify for a refund.

How do the banks justify this? By saying that those customers have been grossly negligent. I’ll give you a couple of examples of this negligence:

  • A customer of Santander had £10,000 stolen from her account. She had done nothing. It had simply disappeared. Santander refused to repay the money, claiming that its systems were secure so the cash must have been stolen by the customer’s fiance. After the police arrested one of the bank’s employees for the theft, Santander had a grudging change of heart, but would only make good the loss if the customer signed a confidentiality agreement.
  • Barclaycard sent a replacement card to the wrong address. Foreseeably, there was a  spending spree on the card and a debt of £16,000 was run up. The customer complained, because the crime couldn’t have happened without the bank’s negligence. She asked for her money back. Barclaycard refused, saying that the transactions were chip-and-PIN, the systems were secure, so the customer must have spent the money.

Can you see gross negligence on the part of the customer in either case? Neither can the Financial Conduct Authority. So what is it going to do about it? It’s going to carry out a review to see if its suspicions are borne out by the facts. Decisive, eh?

The recurring theme here is that the banks’ systems are secure, so the customer must be at fault. This is clearly hogwash. The fact that these problems have occurred demonstrates that the banks’ systems are singularly insecure. These systems are not of the customers’ making. They have been foisted on them by the banks in the interests of maximising profit.

Santander is the leader in this nonsense. Its systems are acknowledged to be the the leakiest, yet it is the least flexible bank when dealing with defrauded customers. It’s a paradox.

Coincidentally, the FCA has concerns about the resilience of these systems in all banks. It thinks that they may not be fit for purpose. What urgent action will it take? It will carry out a review.

So, these IT systems, which are being used as a gold standard to decide whether a customer is a victim or a criminal, are themselves deeply inadequate. This wouldn’t matter, except that the banks are the final arbiters in these decisions. Don’t waste your breath telling me about the Ombudsman. The Ombudsman can’t comment on the banks’ systems in place (I quote).

The problem at the root of all this is the banks’ choice, made some years ago, not to waste money on preventing fraud. They have had a change of heart since then, but the criminals have had a head start and the banks are constantly playing catch-up. They are not playing it very well.

It was the banks who made this appalling error of judgement, not their customers. It is only fair that the banks should take the pain. Do we think that the FCA’s reviews will bring this about? Experience would suggest not.

 

 

 

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