Firms making good progress in handling unauthorised transactions

Research into how claims are handled for unauthorised transactions (when a payment is made from a consumer’s account without their consent) found that firms are making good efforts to deliver fair outcomes for consumers.  A thematic review into the issue by the Financial Conduct Authority (FCA) found firms tended to err on the side of the customer and handled complex claims on a case-by-case basis.

Linda Woodall, acting Director of Supervision - retail and authorisations, said:

“It is encouraging that firms are making good progress on this issue. Consumers have a right to feel confident that if someone takes money from their account without their permission they will get it back.  Our consumer research showed just how distressing unauthorised transactions can be and we are pleased that firms recognise this.”

The FCA found examples of good practice including: active monitoring of decisions to ensure they are fair, particularly where refunds are declined; ensuring the most complex cases are being managed by the most experienced staff and are escalated appropriately, and; good knowledge sharing within firms to ensure that less experienced staff learn from more experienced case handlers.  The regulator also noted that firms were proactively providing information to customers on how to avoid becoming a victim of fraud.

However there were also some issues, including some confusion from firms on how to handle unauthorised transactions made using an overdrawn current account.

Based on their findings, the FCA does not believe further thematic work is required however firms should rather consider the findings and take action where needed.

Notes to editors

1. The executive summary of our report contains a longer list of findings. TR15/10: Fair treatment for consumers who suffer unauthorised transactions[1].

2. We commissioned independent consumer research[2] to support our thematic review of firms.

3. What is an unauthorised transaction?
   An unauthorised transaction is a payment made from a customer’s current account or credit card (or other product such as an e-money account or savings account) without their consent.
   This can include:
   •     Card transactions, including online and in retailers
   •     Account transfers
   •     ATM cash withdrawals
   •     Continuous Payment Authorities (these are regular payments from a customer’s account which become unauthorised transactions if they continue to be taken after the point that the customer requests cancellation)

   Unauthorised transactions can occur for numerous reasons, including:
   •     Fraud
   •     Duplicate payments (for example, a card payment that has been mistakenly debited from a customer’s account twice)
   •     Failure to act on customer’s instructions
   •     Theft of a debit or credit card.

   The full legal requirements are detailed in the report and these include the Payment Services Regulations (2009) and the Consumer Credit Act 1974.

4. On 1 April 2013, the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA). On 1 April 2014, the FCA took over responsibility for consumer credit regulation.
5. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
6. Find out more information about the FCA[3].