Banks are facing criticism as a recent investigation reveals that over 30% of cases sent to the Financial Ombudsman Service involve incorrect account closures.

Banks are under fire for how they handle client accounts after Which?, a consumer advocacy group, discovered that over 30% of cases sent to the Financial Ombudsman Service (FOS) involve incorrect account closures. The data reveals that banks are not taking sufficient care to avoid closing the accounts of innocent clients, leaving them unable to access their funds, even though they have the right to quickly close accounts as part of their attempts to combat fraud and enforce anti-money laundering legislation.

The FOS records show that TSB is the company that receives the most complaints, with a large percentage of those complaints being upheld being related to Cifas markers. These indicators are essential for spotting probable fraud and alerting the appropriate institutions. In more than half of the recent complaints involving Cifas markers, the FOS contested the TSB’s conduct.

In the years 2022 to 2023, the FOS upheld almost 31% of Barclays and Metro customers’ cases, 33% of HSBC customers’ cases, and 39% of TSB customers’ cases. Even more complaints were made about the Royal Bank of Scotland, with the FOS ruling against the bank in more than 40% of those cases between 2021 and 2022.

Which? is urging banks to conduct fair assessments of such decisions and to give customers clearer advice on how to appeal service denial decisions. The group also emphasizes how important it is for social media companies and other businesses, including banks, to improve data exchange in order to protect innocent people from becoming involved in the fight against fraud.

Unsettling times

Having your bank account closed without notice may be a very distressing situation, especially at a time when millions of households are having difficulty making ends meet, according to Sam Richardson, deputy editor of Which? Money. Which? is worried that some banks are mistakenly terminating consumers‘ accounts or awarding them Cifas markers, which can have a long-term negative impact on their access to other financial products.

“Which? acknowledges the significance of banks being able to close accounts quickly in the fight 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 take their claim to the Ombudsman.”

In response, TSB said that it often makes critical judgments to decrease fraudulent activity and that errors of judgment are uncommon.

“We have one of the lowest numbers of reported cases among the institutions listed,” a spokeswoman said. The prevalence of fraud has been significantly reduced because to our tight collaboration with Cifas, and a wrong decision is extremely rare. We followed the FOS’s advice, and as a result, our referrals in 2023 are getting better.

Defending clients

UK financial, speaking on behalf of the banking and financial sector, emphasized the sector’s dedication to safeguarding clients from the risks of fraud. The organization made it clear that banks decide whether to cancel an account after carefully reviewing and analyzing the account behavior, with a focus on being fair to the consumer.

“UK Finance runs a consumer education campaign, Don’t be Fooled, which highlights the warning signs and dangers of being a Money Mule,” the representative further stated. We advise all of our clients to never divulge their PINs, passwords, or passcodes to third parties, and to never let anybody else use your bank account unless you are sure that they are trustworthy.

Additionally, Which? has emphasized that banks themselves should perform fair evaluations, sparing customers the time-consuming task of filing complaints with the FOS.

Additionally, it advises customers to complain to Cifas before going to the FOS if they have problems after contacting the company or organization that made the recording.

Financial Ombudsman Service (FOS)
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