Consumers have suffered a slight setback with regard to protection from banking fraud following the recent Supreme Court decision in Philipp v Barclays Bank [2023]. Meanwhile, the banks have breathed a collective sigh of relief as it was ruled that victims of authorised push payment (APP) fraud cannot make use of the Quincecare duty of care to seek reimbursement of funds from their bank or other payment service provider.
For those who are unfamiliar with APP fraud – it involves a fraudster posing as a customer’s bank and telling them that their bank account has been compromised. They will then convince the customer to transfer monies to an allegedly “safe account”. If the customer does so, the fraudster will then misappropriate these funds.
The case discussed the application of the Quincecare duty in relation to this type of fraud. The ‘Quincecare’ duty is imposed on banks and requires them “not to execute a payment instruction given by an agent of its customer without making enquiries if the bank has reasonable grounds for believing that the agent is attempting to defraud the customer”.
The case found in Barclays’ favour and ruled that whilst they will be held liable if they go ahead with a transfer without making further enquiries when a reliable source has informed them that the customer’s payment instruction was procured by fraud, they are not under a legal duty to step in when they think their customer is a victim of APP fraud.
The court’s reasoning for this decision was that, unless an express contractual term requires them to do, a bank has a strict duty to act on a customer’s instructions and to do so promptly, and that it was not its duty to “concern itself with the wisdom or risks to its customers’ payments decisions’. Banks cannot unlawfully refuse to act on customer’s instructions as it could expose them to a claim from the customer.
The good news for consumers is that legislative steps have been made to resolve this issue in the form of the Financial Services and Markets Bill 2023. Under the Bill it is intended that there should be an obligation for payment service providers to reimburse victims of APP fraud via the Faster Payments Scheme (which is how most consumer UK inter-bank transfers are made). However, the Bill does not protect businesses or transfers made abroad.
For more information or advice on this or any other dispute issue, please get in touch with Gordon Monaghan directly on 0115 9 100 248 or email [email protected].
Posted on July 18, 2023
