U.K. Banks Could Be Forced to Refund Fraud Victims: Telegraph

(Bloomberg) --

U.K. lenders would be forced to refund all victims of financial fraud if plans being proposed by an official watchdog are adopted, according to the Telegraph newspaper.

The Payment Systems Regulator -- an independent subsidiary of the Financial Conduct Authority -- will lead a consultation due to begin within weeks on whether customers who are tricked into transferring money to criminals should get mandatory refunds, the paper said, citing anonymous industry sources. The preferred position of the U.K. government is for all victims to be compensated, it said.

“In the new year, we expect to consult on some of the other steps that may be required to make sure everyone benefits from the highest possible level of protection,” a spokesman for the Payment Systems Regulator told the Telegraph.

Most major banks signed a voluntary code of conduct last year that details how scam victims should be treated, though it allowed lenders to deny a refund if they believe the customer’s own negligence led to the fraud. In the first half of this year, 38% of funds lost to fraud assessed under the code was returned to victims, according to banking trade body UK Finance.

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