Banks must act on refunds rules

By Bob Howard
Reporter, Radio 4's Money Box

The FSA is imposing new rules on refunds

Banks will have to change the way they deal with customers who say their cards have been fraudulently used with the correct pin.

The warning comes from the Financial Services Authority which began regulating current accounts on 1 November.

The FSA says banks must refund customers first and then investigate how disputed transaction happened.

The banking industry says it already complies with the new rules.

Refunds refused

Customers who contacted Radio 4's Money Box programme said their banks were often refusing them a refund by simply stating that the chip and pin system is secure and so they must have been at fault if a fraudster had used their card with the correct pin.

It's their responsibility to get on with this. If they've not done it, that's going to be a problem for them.

Dan Waters, FSA

When Money Box sent some of the letters to Dan Waters, the FSA's Director of Conduct Risk, he told the programme he would not accept similar letters being sent now:

"When I read some of the letters, what I took away was it's impossible for the system to be compromised, therefore it's your fault. Letters that look like that are not acceptable."

Until now, the banks have investigated first and only given customers their money if they were satisfied with the results. Mr Waters says the system needs to work the other way round:

"The bank needs to have grounds for believing the customer has done something deliberately wrong or recklessly wrong. In the meantime, the refund is to be made."

New regime

He warned that the FSA would be checking that banks comply with the new rules:

Dan Waters from the FSA is now responsible for regulating current accounts

"It's their responsibility to get on with this. If they've not done it, that's going to be a problem for them. If there are terms and conditions out there which don't look right that's something we can deal with now."

Joanne Smith, CEO of the Consulting Consortium and an expert in compliance who advises the banks agreed that the banks need to act quickly to make sure their houses are in order:

"The regulator will be visiting them on a regular basis so they will be expected to have these terms in play. Where they don't comply or they're not clear that must be changed."

Banks comply

Major high street banks contacted by Money Box all said they conformed to the new FSA regime. HSBC said it was confident it complied with the new rules:

"HSBC can reassure its customers that genuine cases of fraud are always refunded and customers are never left out of pocket.

We look at all disputed transactions on an individual basis and our process of dealing with these transactions is fully compliant with payment service regulations."

BBC Radio 4's Money Box is broadcast on Saturdays at 12 noon, and repeated on Sundays at 2100h. Download the podcast.