Banks are facing scrutiny over their handling of customer accounts, as data obtained by consumer champion Which? reveals that they are wrongly closing accounts in over 30 per cent of cases referred to the Financial Ombudsman Service (FOS).
While banks have the authority to swiftly close accounts as part of their efforts to combat fraud and enforce anti-money laundering rules, the data suggests that they are not taking adequate care to avoid closing the accounts of innocent customers, leaving them unable to access their funds.
According to the FOS data, TSB emerges as the firm receiving the most complaints, with the highest proportion of upheld complaints linked to Cifas markers. These markers play a crucial role in identifying potential fraudulent activity and notifying relevant institutions. The FOS disputed TSB’s actions in over half of the complaints concerning Cifas markers in recent years.
In the 2022 to 2023 period, the FOS upheld 39 per cent of TSB customers’ cases, 33 per cent of HSBC customers’ cases, and nearly 31 per cent of Barclays and Metro customers’ cases. The Royal Bank of Scotland also faced an even higher rate of complaints, with the FOS finding against the bank in over 40 per cent of account closure complaints between 2021 and 2022.
Which? is calling on banks to provide clearer instructions to customers on how to challenge decisions about denied service and to conduct fair reviews of such decisions. The group also underscores the need for banks and other industries, such as social media firms, to enhance data sharing in order to prevent innocent customers from becoming entangled in the fight against fraud.
Worrying times
Sam Richardson, deputy editor of Which? Money, said: “Having your bank account closed without warning can be an incredibly stressful experience – not least at a time when millions of households are struggling to pay the bills. Which? is concerned that some banks are wrongly closing customers’ accounts or handing them Cifas markers which can affect their ability to access other financial products for years.
“Which? recognises the importance of banks having the ability to close accounts quickly in the fightback against fraud, but wants to see better communication to customers on what they need to do to challenge decisions, and fairer reviews by banks of these decisions – rather than leaving customers to have to take take their claim to the Ombudsman.”
In response to this, TSB stated that it makes important decisions daily to reduce fraudulent activity, and an incorrect judgment is rare.
A spokesperson commented: “We have one of the lowest number of reported cases from the institutions listed. Our close work with Cifas plays a vital role in reducing the incidence of fraud and an incorrect judgement is highly exceptional. We have acted on guidance from the FOS and our referrals in 2023 continue to improve.”
Protecting customers
The banking and finance industry, represented by UK Finance, outlined its commitment to protecting customers from the risks of fraud. The group clarified that banks make decisions to close an account after conducting a thorough review and analysis of the account activity, with a strong emphasis on fairness to the customer.
A spokesperson also added: “UK Finance runs a consumer education campaign, Don’t be Fooled, which highlights the tell-tale signs and risks of being a Money Mule. We encourage all customers to never share their PINs, passwords or passcodes with anyone or allow your bank account to be used by someone unless you know and trust them.
Which? has also emphasised that banks themselves should conduct fair reviews, relieving consumers of the burden of pursuing time-consuming complaints with the FOS.
It also suggests consumers complain to the firm or organisation that recorded and this doesn’t resolve matters, to complain to Cifas before escalating to the FOS.
