UK Banks Create Money Pool To Refund Fraud Victims

A group of U.K. financial institutions are signing a voluntary code to refund consumer and small business victims for fraud schemes, the BBC reported on Tuesday (May 28).

Reports said an estimated 84,000 bank customers lost money to fraud schemes, which tricked victims into transferring money to cybercriminals. Only a portion of them ever reclaimed their lost funds, but now a group of financial institutions are setting up a central pot of funds to refund fraud victims, including small businesses.

So far, 17 banks have signed up for the initiative, including Barclays, HSBC, Lloyds, RBS, Santander, Starling Bank and others. The banks will refund customers categorized as “no blame,” meaning neither the bank nor the customer is to blame for the fraud.

Banks have traditionally refused to refund fraud victims because many schemes actually involve the customer voluntarily initiating the payment. The BBC reported on one small business owner, Alex Luke, who mistakenly provided sensitive login credentials required to gain access to her bank account, resulting in the theft of about $228,000. Banks had refused to refund the stolen money, but she fought her case with the Financial Ombudsman Service and won.

Reports said the financial institutions are aiming to establish a more long-term solution by the beginning of next year. In the meantime, a central pot of funds to finance refunds will be used, as well a standardized set of criteria to declare whether a fraud victim is to blame or not.

“For the first time, any victim who is a customer of a signatory firm will be fully refunded, as long as they meet the standards expected of them,” explained APP Scams Steering Group Independent Chair Ruth Evans. “From today, the majority of consumers will be covered by the code.”

Customers who have already fallen victim to a fraud scam cannot request a refund, reports noted. Those discovered to have been “grossly negligent” will also not qualify for reimbursement.

Virgin and Co-op have not signed up to participate, with the institutions noting that they did not participate in establishing the rules of the scheme and they will only be able to sign up at a later date. TSB established its own fraud refund program earlier this year.