Rise in victims hit twice by scammers worries Banking Ombudsman
20 December 2022
A growing number of bank customers are falling foul of scammers a second time as ‘recovery room scams’ take off, says Banking Ombudsman Nicola Sladden.
Ms Sladden said recovery room scammers posed as online agencies offering to help victims recover their funds, but the upfront fee they charged merely amounted to another scam because they offered no real help, and victims never saw any of their money again.
“The most insidious thing about these scams is they prey on people who have already suffered heavy financial losses and are desperate to recoup those losses,” said Ms Sladden. “We’ve seen more and more of these cases in recent months. Invariably, victims lose even more money – and involving such agencies sometimes prejudices their ability to recover their funds.”
Recovery room scammers operate through websites and claim to be experts in helping scam victims recover their funds. They claim to work with customers to build a strong case to force the return of funds from the merchant or original scammer.
However, Ms Sladden said these so-called experts have a poor understanding of banking practices and the rights and obligations of banks and consumers under New Zealand law.
Recovery room scammers typically send customers a standardised letter to pass on to their bank arguing why they should be reimbursed for their losses. The arguments are deeply flawed in fact or law. They assert, for example, that a regulator must physically inspect a merchant’s premises before the merchant can accept a payment, or that a lack of regulatory reach over online merchants means the merchants cannot provide the goods or services in question. The letters also frequently make reference to international standards that do not apply in New Zealand or to non-existent legislation or incorrect statements of law.
“These arguments serve only to confuse the situation and result in delays or misunderstandings that can hinder banks’ efforts to recover payments.”
Ms Sladden said that in one recent case, a customer engaged a recovery room agency after he lost $350,000 in an investment scam – only to lose another $45,000 to the agency. It pressured him into making the payment, saying it was a prerequisite to starting the retrieval process. Despite the agency’s website saying it offered a 100 per cent money-back guarantee and was successful in more than 95 per cent of cases, the customer never saw any of his money again.
Ms Sladden said customers should approach their bank directly for help, as banks have teams dedicated to helping scammed customers recover their money. She adds that the Banking Ombudsman Scheme can offer independent advice and assistance to scam victims as they deal with their bank.
She also urged banks to do better to support scam victims and inform them of other support available, such as the Police, Victim Support and IDCare.
For more information on scams, see the Banking Ombudsman Scheme’s:
Quick Guide to recovery room scams
Scam complaint numbers spike, reports Ombudsman
30 September 2022
Scammers have been busier than ever in their efforts to fleece bank customers, according to the Banking Ombudsman Scheme’s latest annual report.
Banking Ombudsman Nicola Sladden said the scheme received 535 scam complaints out of a total of 4,732 in 2021-22 – an increase of 63 percent on the previous year.
“Scammers are becoming increasingly devious in their efforts to steal customers’ money, but customers can foil the overwhelming majority of these attempts by following some basic precautions.”
She said these precautions included:
- password-protecting your devices and using strong passwords or biometric log-ins
- never logging in to internet banking when someone has remote access to your device
- looking up reviews of investment companies before investing.
The scheme has produced a tip sheet to help people steer clear of the most common types of scam complaints it receives.
Ms Sladden said the scheme’s total caseload was down 1.7 per cent on the previous financial year, and the number of cases formally investigated was down even more – 15.7 per cent. She attributed this to the scheme’s early resolution service, which aimed to sort out enquiries and complaints as quickly as possible before they escalated into formal disputes.
The annual report showed the biggest source of complaints continued to be lending, half of which involved home loans. Complaints of this type rose markedly in November 2021, largely because of amendments to the Credit Contracts and Consumer Finance Act 2003.
“These legislative changes caused unexpected delays to borrowers, although we foresaw that greater scrutiny of loan applications would probably have this effect and prepared guidance for borrowers. Nonetheless, complaints rose – both to banks and to us.”
Ms Sladden said the scheme had expanded its complaints dashboard, which contains data on complaints about banks, to include information on banks’ complaint-handling practices. The dashboard details how each bank resolved complaints, how long it took and what outcome it reached with the customer.
She said the dashboard was proving a valuable source of information about the nature and extent of problems in the sector, and the scheme was analysing the data to provide insights to banks, regulatory bodies and government agencies.
Another feature of the year was the scheme’s preparations to deal with complaints stemming from the impact of COVID-19, particularly from customers experiencing financial difficulty, but to date the number of such complaints had been small. However, Ms Sladden said the deteriorating economy, higher interest rates and strong inflation could change that in the coming year.
The summary annual report is available here.
Frustration over cancelling recurring payments prompts guide update
23 September 2022
The Banking Ombudsman Scheme says more people using debit or credit cards for recurring payments for online subscriptions are experiencing difficulty cancelling payments, prompting it to update its guide on credit and debit cards.
Banking Ombudsman Nicola Sladden said the scheme had received numerous complaints recently from bank customers frustrated at their bank’s inability to stop recurring payments, most commonly for streaming services, anti-virus programmes and free or low-cost trials – the last of these often resulting in significant unexpected charges.
“Many people assume such payments are direct debits that can be cancelled by their bank, but they are actually authorised through the card provider – usually Visa or MasterCard – and are notoriously difficult to cancel without the co-operation of the company receiving the payments.
“Many people also think they can cancel their card or close their credit card account, and this will stop future payments. But this isn’t necessarily so because the authority remains valid until cancelled with the company. In addition, card providers’ rules allow a company to charge the customer even though the customer has cancelled the card or closed the account.
“The only way to cancel these payments is with the company directly. If it ignores the cancellation request, the bank can’t stop the payment – but it can recover it through a chargeback.”
Chargebacks allow card providers to reverse payments if, among other things, a seller has debited an account after the customer has cancelled the service. Evidence of cancellation is generally required, so the Banking Ombudsman recommends keeping a record of the request.
See the revised Quick Guide to direct debits.
Following simple steps can thwart scammers, says Banking Ombudsman
25 August 2022
The Banking Ombudsman is urging bank customers to take more steps to protect themselves from scammers as her scheme comes across more and more easily avoidable scams.
Nicola Sladden said her experience was that many victims were thoroughly convinced of the legitimacy of the person to whom they intended sending money, particularly in the case of investment and romance scams.
“Often, they have met the individual online and have developed what they considered a personal connection with that person – thanks to scammers’ increasingly sophisticated manipulation techniques.
“We’ve seen cases where the scammer’s deception could have been unveiled, but the victim didn’t know what to check for. However, the good news is that following some simple steps can thwart scammers.”
As well as the standard advice in its Quick Guide on scams (see here), the Banking Ombudsman advises looking up the person or entity you want to send funds to, and listening to any warnings.
1. Image search online romantic partners
In one recent case, Fred* complained that his bank would not allow him to make international transfers to Jessica, a woman in the United States with whom he believed he had a genuine relationship. The bank had clear evidence Jessica was not who she claimed to be. When it looked up photos of “Jessica”, it found they matched a woman with a different name living in another country.
An online image search will show if the image has been used elsewhere – a strong indication scammers have created a fictitious person.
“In this case, the bank’s fraud investigator went above and beyond the call of duty to demonstrate the scam to Fred. He remained convinced, but we applaud the bank’s actions in unveiling the scam.”
2. Listen to bank warnings
In another case, Malia* complained that her bank did not stop her from transferring her money to a cryptocurrency trader. But the bank had noticed the unusual transactions and queried them with her. When Malia said she was transferring funds to a cryptocurrency trader, the bank warned her that fake traders were about, and said she should ensure she was dealing with someone genuine. Malia chose to proceed but later complained when she realised it was a scam.
“It is vital customers take warnings from their bank seriously. If your bank mentions any concerns about fraud or scams, we recommend you act with extreme caution.”
3. Look up reviews and warnings about investment platforms
In a third case, Raymond* transferred money to an online platform via a New Zealand-based cryptocurrency trader. Raymond had made the payments himself through his mobile banking without the involvement of any bank staff. The platform was fake, and Raymond lost all his money. He thought the bank should have warned him of the risks of buying cryptocurrency.
“Sending funds to a cryptocurrency trader isn’t, in itself, indicative of a scam. Many people legitimately invest in crypto,” said Ms Sladden, “but bank systems can’t catch all scams so customers must remain vigilant about protecting their own interests.”
Search engine results for the company Raymond had invested with showed numerous warnings about it being a very sophisticated scam. If Raymond had looked up the company before transferring his funds, he would probably have realised he was taking a very high-risk step.
The Banking Ombudsman also recommends checking whether the investment platform appears on the Financial Markets Authority’s list of scams – or on similar lists for the regulator of the country where the company is incorporated.
Read the case notes for Fred, Malia and Raymond on the scheme’s website:
Bank’s scam concerns justified restricting customer’s services
Bank gave adequate warning of crypto-scam risks
Bank had no reason to suspect funds were going to fraudster
*not real names
Spike in lending complaints abates, says Banking Ombudsman Scheme
31 May 2022
Complaints to banks about lending-related matters fell markedly in the first three months of the year, according to data published today on the Banking Ombudsman Scheme’s complaints dashboard.
In total, banks received 22,132 complaints during the quarter, down 9 per cent on the previous quarter.
Lending complaints overall fell 21 per cent, after having risen 16 per cent in the previous quarter. The biggest swing was in home loan complaints – down 37 per cent after a rise of 19 per cent in the previous quarter.
The data also showed complaints about personal loans fell 18 per cent, while credit card complaints remained steady.
Banking Ombudsman Nicola Sladden previously attributed the rise in lending complaints in the last three months of 2021 to changes in the lending environment, including the introduction of amendments to the Credit Contracts and Consumer Finance Act 2003, which require closer scrutiny of customers’ expenses when assessing loan applications.
Ms Sladden said she was pleased with the turnaround on home lending complaints, which she put down to banks and customers adjusting to the credit law changes, seasonal variation and possibly reduced demand for home loans as the housing market slowed.
Ms Sladden was also pleased to announce new features for the dashboard that will result in more transparency about the nature and extent of problems in the sector, and how banks respond to them.
The dashboard now displays detailed information about each bank’s complaints so the public can see what a bank’s customers complained about most, as well as how promptly the bank resolved complaints and whether customers were satisfied with the outcome. When a bank, for example, has an outage, the public will be able to see how that affected customers, and how well the bank dealt with the problem.
A new “trending” feature shows products and service delivery areas that have attracted significantly more or less complaints since the previous quarter.
The dashboard can be accessed here.
Lending complaints up sharply, says scheme
31 March 2022
Complaints to banks about lending-related matters rose sharply in the last three months of 2021, according to data published today on the Banking Ombudsman Scheme’s complaints dashboard.
The data shows complaints about home loans and credit cards rose 19 per cent and 16 per cent* respectively between October and December 2021 compared with the previous three months. Complaints about long waiting times for a loan decision were up 62 per cent on the previous quarter, while complaints about declined applications were up 22 per cent.
In total, banks received 24,206 complaints during the quarter, up 3 per cent on the previous quarter. Of these, 12 per cent were about what customers considered to be banks’ failure to follow through on agreed action, and this was particularly so in lending-related matters.
The dashboard, launched in August 2020, combines data about the problems customers report to their banks, and the scheme uses the results to identify trends and help improve banking. The dashboard can be found here.
Banking Ombudsman Nicola Sladden said she was not surprised by the increase because it coincided with the introduction of amendments to the Credit Contracts and Consumer Finance Act 2003, which require lenders, among other things, to scrutinise customers’ expenses more closely when assessing loan applications.
“We knew some customers wouldn’t be happy about this greater level of scrutiny – or the resulting longer processing times.
“We issued a guide in October to help customers prepare for the changes, but many would still have been caught by surprise.”
Ms Sladden said the tightening of loan-to-value ratios and an increase in interest rates during the quarter were also contributing factors to the spike in lending-related complaints.
In November, the Reserve Bank halved the amount of low-equity lending banks were able to provide, leading some banks to withdraw or modify pre-approvals issued to borrowers with deposits of less than 20 per cent.
The scheme also received more lending-related complaints between October and December, with a doubling of concerns about delays and banks not acting as promised, as well as a significant increase in concerns about unfair fees and rates.
While complaints about financial hardship have declined, heightened consumer vulnerability from the effects of the pandemic, coupled with the rising cost of living, could drive more complaints this year. Ms Sladden said she encouraged customers struggling financially to seek help early on from their bank. They could also try the free and confidential MoneyTalks service. The scheme has a Quick Guide on hardship and financial difficulty.
*Correction made on 16 May 2022 as previously stated percentages were incorrect.