Ombudsman Service Reports Record High Levels of Fraud and Scam Complaints

The volume of fraud and scam complaints reported by an ombudsman responsible for resolving disputes between consumers and financial service providers has reached a record high.

The Financial Ombudsman Service (FOS) disclosed that in the first quarter of this fiscal year, over 8,700 cases of fraud and scams were documented. This marks an increase from the 6,094 cases reported in the same period the previous year.

More than half of these cases pertained to online bank transfers, where individuals become victims of authorised push payment (APP) scams.

The ombudsman also observed a rise in complaints involving individuals who encountered investment opportunities on social media and made payments to fraudsters using credit or debit cards. In the initial three months of this fiscal year, 1,500 such complaints were registered, in contrast to 1,100 the prior year.

The CEO and chief ombudsman at FOS, Abby Thomas, expressed that falling prey to fraud is a distressing experience, both financially and emotionally.

“That’s why it’s disheartening to see complaint levels escalating to even higher levels. Often, individuals feel ashamed to have been defrauded, but these crimes can be intricate and highly convincing, and no one should hesitate to come forward,” she stated.

Protection Standards

FOS establishes regulations concerning how financial institutions handle complaints. Currently, the service, which is free of charge, handles and resolves approximately 500 fraud and scam complaints every week.

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Pat Hurley, the ombudsman director for banking, remarked that the cases presented to the service illustrate how “fraudsters’ tactics are constantly evolving.”

Thomas emphasized that regardless of a case’s complexity, FOS is prepared to investigate the complaint.

Individuals affected by financial fraud and scams are encouraged to verify if their bank or financial institution adheres to the Contingent Reimbursement Model (CRM) code. Introduced in 2019, this code delineates consumer protection standards to mitigate APP scams.

Financial entities that are signatories to CRM, such as HSBC, Barclays, Halifax, and other banks and financial providers, offer enhanced protection to customers. They are also committed to reimbursing customers who are not at fault for falling victim to a scam.

Whether a provider is a signatory to the CRM code can influence the outcome of a complaint case.

“Out of the 4,752 APP scam cases we received in the first quarter of this fiscal year, 2,734 were not covered by the code. This is evident in the uphold rate – with 49% of cases falling under the code being upheld, as opposed to 36% that are not,” the ombudsman stated.

Under the newly implemented rules on APP scams, the reimbursement process will be expedited. Starting in October 2024, all payment service providers (PSPs) must reimburse victims of APP scams, with the reimbursement split equally between sending and receiving PSPs.

These regulations were issued by the Payment Systems Regulator (PSR) in December of last year. They encompass a wide range of APP scams up to £415,000, with certain exceptions like transactions made abroad.

A provider may decline a reimbursement request if the customer has displayed gross negligence. Customers who fall victim to fraud after making a payment using a credit or debit card, rather than a bank transfer, are not covered by the CRM code or the new PSR rules.

The ombudsman urged consumers to remain vigilant and avoid suspicious calls from fraudsters pretending to represent authoritative bodies.

“Neither a bank nor any official entity, such as law enforcement, will contact consumers and instruct them to transfer their funds to a ‘secure account.’ If this occurs, hang up and contact your bank immediately,” as advised by FOS.

When exploring investment opportunities, individuals should verify that the provider is regulated by the Financial Conduct Authority, the guidance mentioned.