Fraud and scam complaints hit highest level recorded by ombudsman service

Scam-related complaints have reached their highest level since at least early 2018, according to a service that resolves disputes between consumers and financial firms.

In the first quarter of this financial year (April 1 to June 30), consumers lodged 8,734 gripes about fraud and scams, the Financial Ombudsman Service (FOS) said.

More than half were in relation to customer-approved online bank transfers, also known as authorised push payment (APP) scams.

The quarterly scam complaints total is the highest since the FOS started tracking the data from the first quarter of the 2018/19 financial year.

By comparison, in the same period in the first quarter of the 2023-24 financial year, 6,094 scam complaints were recorded.

The service said the rise in cases is due to several factors, including cases where consumers are putting in multiple claims due to more than one firm being involved.

The ombudsman is also seeing a growth in people inadvertently using their credit or debit card to pay fraudsters.

More online fraud cases are also being brought by professional representatives, the service said.

Abby Thomas, chief executive and chief ombudsman of the FOS, said: “Being a victim of a fraud and scam is a horrendous experience – not just financially, but emotionally too. That’s why it’s disappointing to see complaint levels rising to even higher levels.

“We often hear from people embarrassed to have fallen victim to a fraud, but these crimes can be complex and incredibly convincing, and nobody should be afraid to come forward.

“In recent years, we have investigated thousands of cases, returning more than £150 million to those who have fallen victim to these crimes.

“No matter how complex a case is, people can come with confidence to our free, independent service and we’ll investigate their complaint.”

Many banks have signed up to a voluntary code which provides additional protection for consumers, and means they are reimbursed unless there are exceptional circumstances. Some banks operate their own fraud refund guarantees, such as TSB.

Of the 4,752 APP scam cases received by the ombudsman in the first three months of this financial year, 2,734 were not covered by the code.

Pat Hurley, ombudsman director for banking, said: “Fraudsters’ methods are always evolving, and we continue to see that reflected in the complaints brought to our service.

“We are currently receiving – and resolving – around 500 fraud and scam complaints a week. In all the cases we receive, we’ll look at the individual circumstances and investigate whether a business did everything it was required to do.

“When we do uphold complaints, we expect firms to learn from our findings and apply them to any future interactions with their customers.

“Our service is free, easy to use and impartial.”

New mandatory reimbursement rules set to be introduced next month should also speed up the time it takes to be reimbursed, the FOS said.

The rules being brought in by the Payment Systems Regulator (PSR) and put the onus on banks to reimburse customers who are victims of bank transfer scams unless the customer has been grossly negligent.

However, the ombudsman service said it has seen a significant rise in complaints where people spot investment opportunities on social media and then inadvertently pay fraudsters using their debit or credit cards.

Where this happens, consumers can have less protection because card payments, unlike bank transfers, are not covered by the voluntary code or the new PSR rules, the ombudsman said.

The ombudsman is also seeing more cases of multi-stage fraud where funds pass through several banks before reaching the fraudster.

This is particularly prevalent in cryptocurrency investment scams as well as “safe account” scams – where people are cold called by fraudsters posing as a trusted entity, such as their bank, and persuaded to transfer money to another account.

Although banks have improved their fraud detection methods, the uphold rate for scam complaints continues to be higher than average, the service said.

It upheld 44% of fraud and scam complaints in consumers’ favour in the latest quarter, compared to the average rate of 37% across all products and complaints issues.

The FOS also issued tips to help people avoid scams:

– A bank or other official body, such as the police, will never call consumers and ask them to move their money to a “safe account”. Hang up the phone and contact your bank if this happens;

– It is rare to be asked for money as part of an employment opportunity. If people are asked to do this, it could be a scam;

– Consumers should do their research if they plan on investing, particularly in investments found on social media. They should ensure that the provider is regulated by the Financial Conduct Authority (FCA) and do their own due diligence. Otherwise they may lose all their money if it turns out to be a scam.

Published: 04/09/2024 by Radio NewsHub