Bank fraud refunds - will your bank always give you your money back?

Bank fraud refunds – will your bank always give you your money back?

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Do you have a separate PIN for your credit and debit card accounts? No? You could be breaking your bank’s terms and conditions. Santander and HSBC are two banks that – from January 1st 2013 – will say that customers should have a separate PIN for each credit or debit card, or they won’t be guaranteed a refund in the event of fraud. But can they refuse refunds in this way? Not necessarily, according to the regulator or the Financial Ombudsman Service.

Q. What are Santander and HSBC doing?

A. Santander says that from 1st January customers should make sure they take care with their PIN and don’t choose obvious numbers . You can read Santander’s changes to its terms and conditions (do a word search on PIN and you’ll get to the relevant information). Santander says you must:

  • Take reasonable steps to choose a PIN that won’t be easy to guess.
  • Take reasonable steps to make sure that no one hears or sees your PIN when you’re using it.
  • Take reasonable steps to make sure your PIN is unique to the account(s) you hold with Santander.
  • Not save your PIN or password on software which automatically keeps it (such as the ‘save password’ prompts that you often get when you log onto a website).
  • Set a password or PIN on your mobile phone so it can’t easily be used if it’s stolen.

Q. Will the bank pay out if I’m a victim of fraud and don’t follow these rules?

A. It can’t refuse. According to the regulator, the Financial Services Authority, banks can’t refuse to pay you for money that’s been taken fraudulently, just because the fraudster used your card and PIN. In order for the bank to be within its rights to refuse to compensate you, it has to show that you’ve been grossly negligent, and just because a fraudster used your PIN that isn’t in itself enough to show you have been grossly negligent.

The Financial Ombudsman Service takes a similar view. It looks at complaints about banks that haven’t refunded money after a fraud on a case by case basis. It does ‘side with the bank’ sometimes, but it doesn’t assume that someone’s been grossly negligent – even if they’ve written down their PIN. It’s found in favour of customers when:

  • A consumer was the victim of a burglary at her home. The burglary happened while she was in another room, and she had her card and address book, which contained a note of her PIN, stolen. The bank deemed that the consumer had been negligent in keeping a record of the PIN in her house. The Financial Ombudsman Service concluded that in the circumstances, it would have been reasonable to believe that her card and PIN where fairly safe while she was in her house.
  • A consumer’s daughter was convicted of fraud after taking her mother’s card and using it without her knowledge. The bank insisted the consumer must have been negligent in allowing her daughter, who had problems with drug addiction, access to her card and had been negligent in not taking greater care with her PIN. The Financial Ombudsman Service concluded, based on the evidence provided, that the daughter most likely obtained the PIN while shoulder-surfing her mother using it at some point, rather than the consumer being negligent.

SAVVY TIP: These aren’t general rules and each decision will depend on the individual circumstances.

Q. I’ve contacted my bank after I was a victim of fraud and they told me over the phone that I wouldn’t get a refund. Can they do this?

A. No. A bank has to show why it doesn’t think you should get a refund and it has to investigate every claim. It can’t just tell you over the phone that it doesn’t think you’ve been the victim of fraud. If it does that, tell the staff that you will go to the Financial Ombudsman Service with your complaint if they don’t investigate it properly. The Financial Ombudsman Service says it’s seen an increase in the number of complaints where banks haven’t properly investigated fraud claims.

Q. What should I do to ensure I get a refund if I’m a victim of fraud?

A. You should take some sensible precautions – not least because it will reduce the risk of fraud.

  • Don’t use obvious PINs (such as 1234 or 1111). There’s some interesting research which found the most popular PINs (the interesting bit is about halfway down this page) on the website of a company called Datagenetics.
  • Don’t write your PIN down (and certainly don’t write it down and keep it in your purse!). If you have to write it down, do so in a way that’s not obvious (putting it under ‘Natalie West’ if you bank with NatWest may not be viewed as disguising it enough) and don’t take it with you.

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