TSB fraud refund guarantee — what will it mean for victims?

TSB has become the first UK bank to guarantee its customers will be reimbursed in full if they are the victims of fraud. 

What exactly has TSB announced?

This week TSB said it would commit to covering its 5.2m customers against all types of transactional fraud losses, including cases where customers are tricked into authorising payments to fraudsters. Under current rules banks are not obliged to refund fraud victims who lose money in this way. 

TSB has said it will protect against all types of transactional fraud losses up to a cap of £1m. Traditionally customers have only been entitled to a refund when a fraudster takes money from their account without the customer’s knowledge but the new guarantee could cover instances when individuals have been duped into unwittingly authorising payments to fraudsters. 

How will it work in practice? 

TSB customers who have been victims of fraud will need to contact the bank to report the fraud whereupon the bank will still investigate the claim. TSB says it will not repay any losses due to fraud committed by individuals on their own account and that customers abusing the guarantee by repeatedly ignoring account safety advice may be excluded from future refunds. 

Past losses won’t be covered by the guarantee — only those from April 14 onwards for existing and new customers. 

Is fraud a big issue for banks in the UK?

The trade body UK Finance has reported that more than £1.2bn was stolen by fraudsters in the UK last year. Of that, £354m was lost through authorised push payment (APP) scams in 2018, when a customer authorises a payment directly to a scammer, believing them to be someone else. 

An APP scam occurs when customers transfer money directly into a fraudster’s bank account, usually as a result of being duped. For example, a customer may have been led to believe they have been called by their bank’s fraud department and need to move money into a “safe account” as a matter of urgency. In other cases a fraudster may pretend to be a legitimate contact via email, such as a builder or solicitor, and then persuades customers to transfer money straight to their accounts. 

Most banks already compensate customers that lose money as a result of bank failures, such as hackers accessing card details — known as ‘unauthorised’ payment scams. The problem comes when the victim authorises the payment or bank transfer.

What are the other banks doing?

A new code of practice designed specifically to deal with the problem of push payment fraud and help victims be reimbursed more easily comes into force on May 28 and will guarantee that “blameless” victims of fraud will get their money back.

However, critics say this does not go far enough and under the new code banks can still claim that a victim ignored an email or letter from the bank warning about the fraud and refuse to pay out. This means that those who are at fault in some way — because, for example, they have been tricked into giving away sensitive account details — will still be out of luck. None of the other major banks have gone as far as TSB in its pledge this week.

TSB has been in the headlines recently for other reasons, hasn’t it?

Yes. It attracted a wave of complaints and negative publicity last year, after an IT meltdown locked 1.9m customers out of their accounts. The glitch resulted in hundreds of customers being tricked out of money by fraudsters. TSB refunded those affected. 

Bank IT failures are not just an inconvenience for customers, they can also damage people’s credit scores. Outages can mean scheduled payments do not go through or customers cannot access their account to make a payment.

James Jones, head of consumer affairs at Experian, said: “A single late payment can put a significant dent in your credit score so I’d urge anyone affected by banking IT issues to keep a close eye on their credit report for a couple of months. If a problem does surface, such as a regular bill falling into arrears due to payment delays, you should raise this immediately with the bill provider.”

What should customers do if they spot a missed payment on their credit file? 

Customers should ask for supporting evidence from the bank and can also ask the credit reference agency to raise a “dispute” with the provider on your behalf. “This will make sure that the information on your report is marked as ‘unreliable’ while it is being investigated,” Mr Jones said. 


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