The power to settle financial complaints.
The power to settle financial complaints.
Most bank transactions are properly made following the instructions of the account holder – and are completed successfully without any problems. However, sometimes things can go wrong. This is often because the consumer disputes having made or authorised the transaction.
Sometimes the problem is that the consumer agrees they made the transaction, but says that it was not correctly carried out or recorded. An example would be where the consumer went to make a withdrawal from a cash machine, but says the money was not dispensed by the cash machine even though it was debited to their account.
The first step for a consumer who has a problem like this is always to take the matter up with the financial business their account is held with. The quicker disputed transactions are noticed and queried, the greater the chance that they can be put right.
But if this fails to settle the problem, we can take an independent look at what has happened – and decide whether or not the financial business did anything wrong.
This section of our website explains:
We see complaints about disputed transactions involving:
So as well as giving general information on how we deal with complaints about disputed transactions, we have also included some extra information about complaints involving these specific topics.
For complaints about transactions made with credit to buy goods or services – where the dispute concerns the quality of the goods or services provided – our technical note on goods and services bought with credit may be of help.
When we look at complaints about disputed transactions, we take into account:
If there is a disagreement about the facts, we will make our own decision about what probably happened – using the information and evidence provided to us by the consumer and the financial business, and any additional information that we discover from our investigation of the complaint.
Depending on the nature of the complaint, and the type of transaction being disputed, we are likely to ask for these sorts of things:
We ask for this information so that we can get a good understanding of the complaint – and decide it fairly. We focus on information that we believe is necessary to our consideration of the complaint. And so we expect the consumer and the financial business to provide what we have asked for – even if they do not immediately see the relevance of a question we have asked.
Most of the complaints that we see about cash machine transactions are one of the following two types:
We set out below the sorts of information and evidence we are likely to require for each of these types of complaint.
In addition, various types of "scam" have been reported around the use of cash machines – for example, where the machine is tampered with and/or the consumer is distracted by fraudsters.
When we look at complaints involving cash machine transactions, we consider whether the facts of the case point to some form of "scam" having taken place. And we take account of this when we assess whether or not the consumer is liable for the disputed transaction.
Our usual approach to this type of complaint is to obtain a range of information from the consumer and the financial business – including, for example, information about:
The precise questions that we ask will depend on the particular circumstances of the complaint – and are tailored to ensure that we get the right information for the case.
Some of the information we obtain may involve third parties (for example – a print out that also shows cash machine transactions made by other customers before and after the disputed withdrawal). If it is necessary to show the consumer this information, we will remove or blank out anything relating to other customers – to maintain their privacy.
Similarly, we may need to ask the financial business for information about its cash machine or security procedures. Some of this information may be provided to us in confidence by the financial business, if it is sensitive.
Once we have obtained the necessary information, we assess whether or not the consumer probably made (or otherwise authorised) the disputed transaction.
If we decide that the consumer did not make or authorise the disputed transaction, we will go on to assess whether or not the consumer has any liability for it – and, if so, how much. In making that assessment, we will take into account:
Where there is a series of disputed transactions, we will assess whether and how that affects any liability the consumer might have – again taking into account the law, regulations, codes and terms and conditions that apply.
Our usual approach to this type of complaint is to obtain information such as:
We may also need to ask the financial business for information about its cash machine procedures. Sometimes this will include information that we need to keep in confidence – because it concerns sensitive details about security measures.
Once we have obtained the necessary information, we decide whether or not the cash machine dispensed the correct cash for the disputed transaction. If we decide that it did, we will go on to consider whether there are any other factors that might affect the consumer’s liability for the transaction.
Sometimes, consumers who complain to us about disputed cash machine transactions believe the withdrawals have been made by a fraudster using a duplicate card – often called a "cloned" card.
It is relatively easy to transfer some of the information on a credit or debit card (for example, information contained in a magnetic stripe) onto a blank card – or even onto a more sophisticated copy of a debit or credit card.
That information is of limited use to a fraudster where a personal identification number (PIN) is also required to complete the transaction – which is normally the case for cash machines. This means a fraudster must also obtain the personal identification number by some means.
Other features of a debit or credit card (for example, microchips) would be far more difficult to copy and incorporate into a duplicate card – and would require access to specialised technical knowledge and resources.
We will always consider whether or not it is likely that the disputed transaction was made using a duplicate card, in the light of the evidence produced in the case, including:
In some cases we see, the disputed cash machine transaction was made abroad. The consumer may say they were in the relevant country at the time but did not carry out or authorise the transaction. Or they may say they were not even in that country at that time – and so could not have carried out or authorised the transaction.
It can be more difficult to obtain evidence in these cases, as the transaction will have been made through the card systems of the particular country concerned. Different countries have different systems for processing card transactions. These may use different (or less sophisticated) methods of verification for transactions. It may also be more difficult for us to obtain information about the cash machine at which the card was used.
We take account of all these factors when considering complaints about disputed card transactions made abroad.
Not all the complaints we receive about disputed transactions involve cash machine withdrawals. We also see complaints about transactions made with plastic cards in a range of other contexts – including, for example, transactions made in retail outlets, bars and restaurants, or to buy goods or services over the internet.
Typically, the consumer notices the transaction on their account and complains that it is not one they made or authorised. The transaction may have been made with a debit or a credit card – and might have been made by presenting the card in person or remotely by phone or over the internet (sometimes called "cardholder not present" transactions).
Our usual approach to this type of complaint is to obtain a range of information from the consumer and the financial business – including, for example, information about:
The precise questions that we ask will depend on the particular circumstances of the individual complaint – and are tailored to ensure that we get the right information for the case.
Some of the information we obtain may involve third parties (for example, a print out that also shows cash machine transactions made by other customers before and after the disputed withdrawal). If it is necessary to show the consumer this information, we will remove or blank out anything relating to other customers – to maintain their privacy.
Similarly, we may need to ask the financial business for information about its plastic card or security procedures. Some of this information may be provided to us in confidence by the financial business, if it is sensitive.
Once we have obtained the necessary information, we assess whether or not the consumer probably made (or otherwise authorised) the disputed transaction.
If we decide that the consumer did not make or authorise the disputed transaction, we will go on to assess whether or not the consumer has any liability for it – and, if so, how much. In making that assessment, we will take into account:
Sometimes, consumers who complain to us about disputed plastic card transactions believe the transactions have been made by a fraudster using a duplicate card – often called a "cloned" card.
It is relatively easy to transfer some of the information on a credit or debit card (for example, information contained in a magnetic stripe) onto a blank card – or even onto a more sophisticated copy of a debit or credit card.
That information is of limited use to a fraudster where a personal identification number (PIN) or other form of security verification (such as a password) is also required to complete the transaction. In that case, the fraudster must also obtain the personal identification number or password by some means.
Other features of a debit or credit card (for example, microchips) would be far more difficult to copy and incorporate into a duplicate card – and would require access to specialised technical knowledge and resources.
We will always consider whether or not it is likely that the disputed transaction was made using a duplicate card, in the light of the evidence produced in the case, including:
In some cases we see, the disputed card transaction was made abroad. The consumer may say they were in the relevant country at the time but did not carry out the transaction. Or they may say they were not even in that country at that time and so could not have carried out the transaction.
It can be more difficult to obtain evidence in these cases, as the transaction will have been made through the card systems of the country concerned. Different countries have different systems for processing card transactions. And they may use different (or less sophisticated) methods of verification for transactions. It may also be more difficult for us to obtain information about the overseas outlet at which the card was used.
We take account of all these factors when considering complaints about disputed card transactions made abroad.
Sometimes consumers complain that – while they agree they provided their card details to a supplier of goods or services (usually by phone or over the internet) – the supplier has used those details to make a transaction they did not authorise.
An example might be a consumer who used their debit card to pay for an item over the phone – but later found that the supplier had included extra amounts in the transaction, for charges that the consumer was not told about and had not agreed to.
When we deal with complaints like this, we obtain as much information and evidence as we can about the circumstances in which the payment was made – to help us decide what the consumer agreed the supplier could take from the card account.
Where the basis of the complaint is about the quality of goods or services paid for with a credit card, section 75 of the Consumer Credit Act 1974 may apply.
"Chargeback" is the name given to the process that enables consumers – in certain circumstances – to challenge and claw back payments made from their plastic card accounts.
That could be a transaction appearing on a credit card account, or it could be one that appears on a current account as a debit card payment. The cases we see usually concern disputes about VISA credit and debit card, and MasterCard credit card transactions.
The main parties to plastic card transactions are:
Typically consumers who complain to us about chargebacks have asked their card issuer to try to obtain a chargeback of a transaction because:
We can normally consider complaints about chargebacks:
Chargebacks are possible because of the contract between the card issuer (or merchant acquirer) and the card scheme. They are not a right or protection given directly to the card holder.
The exact grounds on which a chargeback may be attempted will vary, depending on the card scheme. Each card scheme operates its own rules for the plastic cards that fall within its scheme. While there are lots of similarities between these various sets of rules, there are also some important differences.
There is also normally a time limit for raising the chargeback request – usually 120 days from the transaction appearing on the account. But there are some variations between card schemes.
We consider that, as a matter of good practice, the card issuer should attempt a chargeback if the card holder has challenged a transaction and – taking account of the relevant card scheme rules – there appears on the face of it to be a fair chance that a chargeback request may succeed.
So we normally expect the card issuer to identify whether the potential exists for a successful chargeback request. And if so, to ensure that a request is processed in the right format and within any time limits that apply.
If it does not do that, then we can consider a complaint from the card holder. And we will decide whether in our opinion the chargeback would have succeeded, if it had been properly made.
Where a chargeback request is made but then refused, the card issuer can take the matter to the appeal process operated by the relevant card scheme. We cannot consider complaints about decisions made by card schemes about chargeback requests, because card schemes are not covered by the ombudsman service.
Chargeback complaints brought by merchants against their merchant acquirers will invariably be about chargeback requests that were made and accepted – because that is the only time a merchant will be affected by a chargeback request.
Typically the merchant will complain that the merchant acquirer had no right to take the money back out of their account in response to the chargeback request. That might be because the merchant disputes the grounds on which the chargeback was made, and/or because it considers that the merchant acquirer did not properly defend the request.
The right of the merchant acquirer to debit the merchant’s account comes from the contract between them. This is often referred to as the "merchant services agreement" and is the agreement entered into at the time the card-processing facilities are first provided to the merchant by the merchant acquirer.
We will take the terms of the merchant services agreement into account, when we assess whether or not we consider the merchant acquirer was entitled to debit the merchant’s account in the circumstances.
Complaints from merchants often involve chargebacks made in relation to card payments accepted over the phone or internet – known as "card holder not present" transactions. Merchant services agreements commonly impose strict rules about when and how merchants may accept these transactions – and in what circumstances they may be clawed back.
If the merchant acquirer has acted properly in accordance with the terms of the merchant services agreement, then we are unlikely to be able to uphold the merchant’s complaint – even where, for example, the merchant has been the innocent victim of a fraudster who has obtained goods from them using a stolen card.
In some cases we see, the merchant says they was misled by the merchant acquirer about the risk of accepting a payment. In these cases, we consider the evidence and decide whether they were misled – and, if so, whether that affects the merchant acquirer’s rights under the merchant services agreement.
If a party is relying on a rule in the card scheme as its reason for not attempting a chargeback in a suitable case, we will consider what the rule says as part of our consideration of the case.
Card scheme rules do not, however, normally cancel out terms in the contract between the financial business against which the complaint is brought (the card issuer or the merchant acquirer) and the party that makes the complaint (the card holder or the merchant).
The complaints we see involving transactions by cheque often include problems where:
We frequently see complaints about a bank or building society debiting a consumer’s account for the amount of a cheque already paid in earlier – usually because the cheque has been reported as stolen or forged.
Typically this happens after the consumer advertised goods for sale and received an offer from a "buyer" who paid by cheque. Often the cheque is for an amount more than the cost of the goods – and the consumer has been persuaded to draw out the surplus and send it to an "agent" nominated by the "buyer". After the consumer has paid the money, the cheque is returned unpaid and the consumer’s account is debited by their bank or building society for the amount of the cheque.
Or the consumer may have been persuaded by a buyer to release goods in exchange for a cheque payment which is later returned unpaid – with the amount debited from the consumer’s bank or building society account.
We can help in cases where the consumer complains that this type of fraud was able to happen because of something their bank or building society did wrong. The sorts of information and evidence we will normally need will include things like:
Once we have satisfied ourselves about what happened, we will consider whether the bank or building society has any liability for the consumer’s loss. When we do this, we take into account all the circumstances, including:
We often see complaints from consumers involving cheques stolen by third parties. This can include cheques in favour of the consumer being intercepted by a thief and paid into a bank account opened specifically for the purpose. Or a cheque being stolen and altered by a thief – before being paid into an existing bank or building society account.
In England and Wales lawyers often call this type of theft "cheque conversion". A consumer can normally refer a complaint to us about the bank or building society that the cheque was paid into, even if they do not hold an account with that particular bank or building society.
Complaints about "cheque conversion" sometimes involve a series of complicated events. Sometimes questions may arise about who was actually entitled to the money involved. In these cases we may need to consider whether that affects our ability to deal with the case – or to decide it fairly.
Understandably, consumers who lose cheques in this way feel very strongly that they should not have to bear the loss of the money – and they may see the bank or building society that accepted the cheque as having an obvious responsibility to pay them back what they have lost.
However, banks and building societies are not automatically liable in this situation. Much will depend on how the cheque came to be obtained by the party who paid it in – and the circumstances in which the bank or building society came to accept the cheque.
When we deal with a complaint about "cheque conversion", we will usually ask for information that includes, for example:
In deciding whether the bank or building society is liable to reimburse the consumer for the loss of the cheque, we will consider all the circumstances, including:
If we decide that the bank or building society did something wrong and is liable for the consumer’s loss, we will usually require it to put things right by paying the consumer the amount of the cheque, together with appropriate interest.
Sometimes there are other losses that were also associated with the "cheque conversion" – in which case we will consider whether or not the bank or building society should compensate the consumer for those other losses as well.
We sometimes see complaints from consumers who say that their bank or building society has paid a cheque drawn on their account, which they did not sign or authorise.
This might happen, for example, where someone takes a cheque from a cheque book that a consumer does not often use (and so does not realise is missing) – and writes out a cheque, forging the true consumer’s signature.
When we consider complaints about forged cheques, we will usually ask for:
Complaints about forged cheques sometimes involve underlying disputes between family members – or even between joint account holders. Depending on the circumstances, this may make it difficult for us to decide a case fairly.
For example, we sometimes see cases where there is a dispute about who exactly is entitled to the money drawn by means of the cheque – or where the evidence of the third party is essential to decide the case.
In these cases we may decide that the matter would be better dealt with by other means (for example, proceedings that are already underway for a financial settlement in a divorce).
Occasionally consumers, or their banks or building societies, want to submit a report from a handwriting expert, to support their argument that the cheque was (or was not) signed by the consumer. We do not require either party to obtain this kind of report, and the costs of commissioning a handwriting expert will not automatically be refunded to a consumer whose complaint is successful. We would also assess the cost of the report in relation to the amount of the transaction in dispute.
We do not usually commission handwriting reports ourselves. In the cases we see, these types of report are not generally of significant help to us.
A bank or building society is not normally entitled to debit a consumer’s account for the amount of a cheque that the consumer did not sign. But there are some special circumstances when this normal rule may not apply.
We will take all the circumstances of the case into account, including the relevant law, when deciding whether (and to what extent) a bank or building society is liable to the consumer for the payment of a forged cheque.
We see relatively few complaints about internet banking. But we sometimes deal with complaints about transactions made using internet banking, which the consumer says they did not make or authorise.
When we consider these types of complaint, we will require information from the bank, including:
We will also ask the consumer for information, which is likely to include:
When we assess whether or not the consumer has any responsibility for a disputed transaction, we take this information into account, together with any relevant law (including sections 83 and 84 of the Consumer Credit Act 1974, where some or all of the transaction was made from a credit facility on the consumer’s account).
"Phishing" is the term normally used to mean a particular type of internet fraud, where the fraudster gains the consumer’s security details through the use of an unsolicited email – which appears to the consumer to have originated from their bank.
Clicking on a link in the email takes the consumer through to a counterfeit website set up by the fraudster to mimic the bank’s online process. When the consumer enters their security information into this counterfeit site, it is used by the fraudster to make withdrawals from the consumer’s account.
Fortunately most consumers who receive "phishing" emails recognise that they are fraudulent and do not respond to them.
But we sometimes see complaints from consumers who have responded to a "phishing" email and consider that, in the circumstances, they should not be liable for a transaction made by the fraudster.
The fact that the transaction was undoubtedly made by a fraudster does not usually mean that the bank must automatically refund the consumer. When we consider complaints about disputed transactions made through "phishing" fraud, we are likely to ask for information such as:
When we assess whether or not the consumer has any responsibility for a disputed transaction, we take this information into account, together with any relevant law (including sections 83 and 84 of the Consumer Credit Act 1974, where some or all of the transaction was made from a credit facility on the consumer’s account).
Some of the disputed transactions that consumers complain about were made over the counter of their bank or building society.
Typically in these cases, the consumer considers that someone else must have impersonated them at the bank or building society branch and made the transaction (usually a cash withdrawal) without their knowledge.
Sometimes the consumer suspects that a member of staff from the bank or building society was dishonestly involved in the matter.
The type of information that we will normally need to see in complaints like this includes:
We will use this information to decide whether or not the consumer made the transaction – or authorised someone else to make it.
As well as seeing complaints about disputed withdrawal transactions made through cash machines, we also see some complaints about disputed deposits made through paying-in machines (including night safes).
Typically the consumer in these cases complains that they made a deposit through the machine that has not appeared on their account – or that they have been credited with less than they paid in.
Sometimes the consumer suspects that a member of staff from the bank or building society was dishonestly involved in the matter.
The type of information that we will normally need to see in complaints like this includes:
We will use this information to decide whether or not the consumer made the deposit – and, if so, how much money was deposited.
We sometimes see complaints involving disputed transactions on joint accounts, where the joint account holders do not agree.
Mr X and Miss Y have a joint current account that they opened when they began living together. They later part on bad terms – but agree to keep the joint account open to pay for the mortgage on their house until it is sold. They each have a plastic card linked to the account.
Some time later Mr X becomes aware that Miss Y has been using her plastic card to make cash machine withdrawals from the account.
There is no doubt about who actually made the disputed withdrawals – and the bank cannot be held responsible. The dispute is between Mr X and Miss Y, and Mr X should look to Miss Y (not to the bank) to pay him back.
However, sometimes the situation is more complicated than in the case study above – and the consumer may feel that the financial business has itself done something wrong.
For example, one or other of the joint account holders may have:
If this is the case, the account holder who has lost money because of disputed withdrawals made by the other account holder may complain that the financial business is fully or partly to blame for their loss.
We can usually consider complaints like this, although sometimes we may have to decide that we cannot fairly decide a particular case. This will mainly happen where there is a dispute between the joint account holders about the ownership of the money that was in the account – or where the evidence of both account holders is essential (we cannot make third parties answer our questions).
Circumstances are likely to be very individual, and we will consider each case on its own individual facts. The matters we will take into account when deciding a complaint like this will include, for example:
contact our technical advice desk on 020 7964 1400
This is part of our online technical resource which sets out our general approach to complaints about a wide range of financial products and issues. We would like your feedback on how helpful you found it. Please also use the feedback form below to tell us about anything you think we could clarify or explain better.