Financial firms need to do more to resolve scam complaints, says ombudsman

Banks and other financial institutions still need to do more to clear up customers’ scam complaints before they reach the ombudsman, the Financial Ombudsman Service (FOS) has said.

The number of fraud and scam complaints where the ombudsman has been asked by customers to step in has jumped by two-thirds in recent months.

Some 5,025 cases in which people were asking for help with fraud and scams were recorded in the first quarter of the 2021/22 financial year.

This was a 66% increase compared with 3,028 cases in the same period during the previous year.

Cases include fraudsters posing as a customer’s bank and convincing them to move their money to a fake “safe account” and consumers paying for goods by bank transfer but not receiving what they paid for.

Six in 10 (60%) of the most recent cases were upheld in consumers’ favour, up from half (50%) a year earlier.

This suggests that banks and other financial institutions still need to do more to resolve complaints from their customers fairly before people seek help from the ombudsman, the FOS said.

Many banks have signed up to a voluntary code which reimburses victims of bank transfer scams in situations where they are not to blame.

Figures released by trade association UK Finance this week showed that £355.3 million was lost due to fraud where people had authorised the transaction in the first half of 2021 – marking a 71% jump compared with the same period in 2020.

But less than half of the total was returned to customers.

The reimbursement code has come under scrutiny amid concerns that it is not being interpreted consistently by banks.

The finance industry has called for a more co-ordinated approach to tackling scams, with many frauds originating online with fake websites and social media posts.

Scammers have bombarded people with fake messages pretending to be from organisations such as delivery companies, banks and HM Revenue and Customs (HMRC) during the coronavirus pandemic.

FOS interim chief executive and chief ombudsman Nausicaa Delfas said: “It’s a real concern that we are seeing such an increase in scams.

“It’s vital that people take extra care with their finances, as unfortunately fraudsters are becoming increasingly sophisticated.  If people feel they have not been treated fairly by their banks, we are here to help.”

The service has also noted an increase in complaints about cryptocurrencies during the pandemic.

While cryptocurrencies are unregulated investments, the ombudsman can look into complaints about banking providers refusing to reimburse consumers who feel they have been a victim of a cryptocurrency fraud or scam.

Anecdotal evidence suggests the increase in complaints about cryptocurrency complaints could be in part driven by social media-based scams, with young people wanting to make extra cash while furloughed, while others were simply spending more time on social media, the FOS said.

Overall, the FOS received 50,906 complaints about financial businesses in the first three months of the financial year.

For the first time in more than a decade, current accounts were the most complained about product, with consumers bringing 6,911 complaints to the service.

This was an increase of 55% when compared with the same period last year, when the ombudsman service received 4,466 complaints about current accounts.

Fraud and scams accounted for around half of the current account complaints that the service received in the first three months of this financial year.

A UK Finance spokesperson said: “We know the devastating impact that fraud and scams can have on victims and firms will always seek to handle cases efficiently and sensitively.

“Any incident of fraud is one too many and the industry’s primary focus is on stopping fraud in the first place and working closely with government and law enforcement to tackle those responsible.

“A significant amount of money is reimbursed to victims of fraud, but we know that more needs to be done, which is why we are calling for the authorised push payment code to be a regulated code, backed by legislation.

“This will help provide more consistent outcomes for customers and ensure that the code applies to firms across the banking and finance industry.”