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TSB first bank to unveil 'fraud refund guarantee' for customers

TSB has announced a new ‘fraud refund guarantee’ to protect customers if they are an innocent victim of a scam. Credit: PA

TSB has become the first UK bank to vow to fully refund customers who fall victim to any type of fraud.

It comes as the bank announces its new "fraud refund guarantee" to ensure its 5.2 million customers are protected if they are an innocent victim of a scam.

More than £350 million was lost last year through scams where victims were tricked into transferring money directly from their account to a fraudster, according to UK Finance.

Despite the huge loss from scams last year, financial providers were only able to return a total of £83 million.

£354m
Amount lost to scams last year where customers were tricked into transferring money to a fraudster

How does TSB's new 'fraud refund guarantee' work?

TSB has committed to covering customers against all types of transactional fraud losses, including cases where customers are tricked into authorising payments to fraudsters.

Customers will need to contact the bank to report fraud, and it will still investigate the fraud claim, including what happened and how, so it can inform the customer and ensure they are protected from future fraud.

It applies to fraud losses incurred on or after Sunday April 14 2019, setting TSB apart from its banking rivals.

This will apply to existing and new personal and business customers, perhaps helping the bank win over consumers after it was heavily criticised for IT woes last year.

What are the conditions to the fraud refund guarantee?

TSB suffered a huge IT meltdown last year. Credit: PA

TSB will not pay out to customers who try to abuse the guarantee - for example, by committing fraud on their own account or repeatedly ignoring safety advice.

It will also not refund losses on retrospective claims as the guarantee only applies to losses on or after April 14.

The bank said it may also adjust the conditions of the guarantee as time goes on to guard against abuse and help prevent and prosecute fraud and reflect requirements from regulators or enforcement authorities.

How is this scheme different?

Across the banking industry, consumers are generally entitled to a refund when a fraudster takes money from their account without their knowledge.

But when someone authorises a payment to a fraudster - often because they have been tricked into thinking they are transferring money to a legitimate organisation - the situation is less clear cut and people have been losing large amounts of money.

What has TSB said?

TSB, which came under fire in 2018 when customers were unable to access accounts due to a huge IT meltdown, said its announcement marks a significant step-change in banking, where customers are only refunded for fraud losses in limited circumstances.

It said TSB customers will be refunded for any loss suffered from their account as a result of third-party fraud.

TSB executive chairman Richard Meddings said: "The vast majority of fraud claims across UK banking are from innocent victims of fraud who have been targeted by criminals and organised gangs.

"However, all too often these customers must fight to be refunded and are not treated as victims of crime.

"If a TSB customer innocently suffers a fraud loss on their account after being targeted by a criminal, we’ll cover it."

TSB said it is also tackling fraud in other ways, including preventing scams through increased education in local communities.

How have experts responded to the new guarantee?

Jenny Ross, Which? money editor, said: "For years, people have lost life-changing sums of money to increasingly sophisticated scams, and then faced a gruelling battle to get their money back.

"We know that banks are far better placed to spot and prevent scams than their customers.

"Today, TSB has rightly recognised this and stepped up to take responsibility for refunding its customers across all types of fraud.

"Yet other high street banks are leaving their customers unprotected.

"All banks must now follow TSB’s lead and ensure that their own customers are not left paying for the cost of this crime."