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The UK financial regulator has warned banks and building societies that they must improve the way they treat victims of fraud or risk being in breach of new rules on consumer harm.
The Financial Conduct Authority on Tuesday said there are several “common weaknesses” in how UK payment service providers manage the risk of authorised push payment fraud (APP), and how victims are treated once a fraud has taken place.
APP fraud, where scammers trick victims into sending them money, is on the rise in the UK, with cases jumping by a fifth in the first half of the year, according to UK Finance. Tackling fraud, which makes up 40 per cent of recorded crime in the UK, is a focus for the government. It launched an anti-fraud strategy this year.
“With more people potentially vulnerable due to cost of living pressures, and fraud methods evolving, it is critical that firms continually evaluate their approach and have robust frameworks in place to detect fraud, as well as effective support for victims when it happens,” the FCA said.
The City watchdog said it expects firms to allow customers to report fraud easily and promptly, communicate clearly and provide appropriate support to those who display vulnerable characteristics. Failure to avoid causing foreseeable harm to retail customers would put banks and building societies in breach of the Consumer Duty, new regulations that set a higher standard of care for consumers in retail financial markets.
“The British public is in a lottery depending on who they bank with as to how any fraud will be dealt with — which shouldn’t be the case,” said Laura Suter, head of personal finance at AJ Bell. “People need to feel confident that their bank will have their back,” she said, adding that those who were not should switch to a rival.
The FCA reviewed 12 current account providers, challenger banks and payment firms, focusing on their approach to fraud risk management. Most of the firms it reviewed had “significant scope” to improve how they tackle fraud, including how they prevent and detect fraud. Automated warning messages and requiring customers to interact with a staff member before a transaction is completed can help prevent some payments, the regulator said.
Other issues include the speed and ease with which bank and building society customers can report a fraud, the FCA said, especially if it occurs outside normal opening hours. Fraud and complaints teams are not always appropriately resourced, the regulator warned, and more assistance is required for customers whose accounts have been frozen over fraud concerns. These issues exacerbate the impact of the fraud and reduce the likelihood of the scam being stopped or funds recovered, it said.
Customer complaint services also need to be improved, with some firms slow to respond to complaints, and others failing to communicate adequately during the complaints process. Final response letters were often “poorly written”, the FCA said, with “aggressive and sometimes accusatory language”.
UK Finance, which represents banks, pointed to the responsibility of other companies in the battle against fraud. “We need other sectors to step up and play their part too.” Banks have frequently accused social media companies of failing to do enough to prevent scams.
